TIM PARTICIPAÇÕES S - Mziq

Free Translation into English of Quarterly Information (ITR)

Originally Issued in Portuguese

Index

Company Information ............................................................................................................................. 2

Capital ................................................................................................................................................................ 3

Approval of Dividends ....................................................................................................................................... 4

Parent Company Financial Statements

Balance Sheet Assets .......................................................................................................................................... 5

Balance Sheet Liabilities and Shareholders' Equity .......................................................................................... 6

Statements of Income ......................................................................................................................................... 7

Statements of Comprehensive Income .............................................................................................................. 8

Statements of Cash Flow .................................................................................................................................... 9

Statements of Changes in Shareholders' Equity

01/01/2014 to 09/30/2014 .............................................................................................................................. 10

01/01/2013 to 09/30/2013 .............................................................................................................................. 11

Statements of Added Value ............................................................................................................................. 12

Consolidated Company Financial Statements

Balance Sheet Assets ........................................................................................................................................ 13

Balance Sheet Liabilities and Shareholders' Equity ........................................................................................ 14

Statements of Income ....................................................................................................................................... 16

Statements of Comprehensive Income ............................................................................................................. 17

Statements of Cash Flow .................................................................................................................................. 18

Statements of Changes in Shareholders' Equity

01/01/2014 to 09/30/2014 .............................................................................................................................. 20

01/01/2013 to 09/30/2013 .............................................................................................................................. 21

Statements of Added Value ............................................................................................................................. 22

Earnings release ............................................................................................................................................... 23

Notes to quarterly information ......................................................................................................................... 45

Opinions and Statements

Report of Independent Registered Public Accounting Firm - Unqualified .................................................... 128

Fiscal's Council Opinion or Equivalent Board ............................................................................................... 130

Directors’ Statement on the Financial Statements .......................................................................................... 131

Director’s Statement on the Auditor’s Report on Special Review ................................................................ 132

Free Translation into English of Quarterly Information (ITR) Originally Issued in Portuguese

Company Information

2

Company name: TIM PARTICIPAÇÕES SA

Last change in the Company Name: 08/30/2004 Prior Company Name: Tele Celular Sul Participações S.A.

Record date: 05/22/1998 C.N.P.J.: 02.558.115/0001-21

CVM Code: 01763-9 CVM incorporation date: 08/19/1998

Situação do Registro na CVM: Active Inicial date of record date at CVM: 09/10/1998

Country of origin: Brazil Contry of securities registration: Brazil

Issuer's page in Internet: www.tim.com.br/ri

Type of participant: Listed Company

Record category at CVM: Categoria A Current category registration date: 01/01/2010

Issuer's situation: Operational Inicial date: 10/09/1998

Type of Control: Private Last change in control:

Last change in accounting period Accounting period: Day: 30 Month: 09

Activity: Telecommunication

Activity description:

Journal name Journal State

Jornal do Commercio RJ

Valor Econômico SP

Country Incorporation date

United States of America 12/16/1998


Parent Company Information - Capital

3

Number of Shares Current Quarter

(units) 09/30/2014

Paid up Capital

Common 2,420,136,000

Preferred -

Total 2,420,136,000

Treasury Stock

Common 795,889

Preferred -

Total 795,889


Parent Company Information – Approval of Dividends

4

Event Approval Proceeds First

Payment Especie Class

Dividends

per Stock

(Reais /

Stock)

- - - - - - -


Parent Company Balance Sheet - Assets

(in thousands of Reais)

5

Account Code Account Description 09/30/2014 12/31/2013

1 Total Assets 15,321,026 15,037,241

1.01 Current Assets 80,151 443,803

1.01.01 Cash and Cash Equivalents 45,031 19,112

1.01.03 Accounts receivable 329 -

1.01.03.02 Other accounts receivable 329 -

1.01.06 Taxes and Contributions Recoverable 21,961 25,118

1.01.06.01 Current Taxes and Contributions Recoverable 21,961 25,118

1.01.08 Other Current Assets 12,830 399,573

1.01.08.03 Other Assets 12,830 399,573

1.01.08.03.01 Dividends and interests on own capital receivable - 389,311

1.01.08.03.03 Other Assets 12,830 10,262

1.02 Non-Current Assets 15,240,875 14,593,438

1.02.01 Long-Term Assets 62,580 50,624

1.02.01.01 Sundry Receivables 86 89

1.02.01.01.02 Available for Sale 86 89

1.02.01.09 Other Non-Current Assets 62,494 50,535

1.02.01.09.05 Escrow Deposits 62,494 50,535

1.02.02 Investments 15,020,739 14,385,258

1.02.02.01 Investments on Subsidiaries 15,020,739 14,385,258

1.02.02.01.02 Subsidiaries 15,020,739 14,385,258

1.02.04 Intangible 157,556 157,556

1.02.04.01 Intangible Assets 157,556 157,556


Parent Company Balance Sheet – Liabilities and Shareholders’ Equity


6


2 Total Liabilities 15,321,026 15,037,241

2.01 Current Liabilities 67,828 409,780

2.01.01 Social and Labor Obligations 1,766 786

2.01.01.02 Labor Obligations 1,766 786

2.01.02 Suppliers - Trade Payable 2,244 1,787

2.01.02.01 Domestic Suppliers 1,667 1,491

2.01.02.02 Foreign suppliers 577 296

2.01.03 Taxes, rates and contributions 2,511 2,817

2.01.03.01 Federal Obligations 2,476 2,768

2.01.03.01.02 Other Fiscal Taxes 2,476 2,768

2.01.03.03 Other taxes 35 49

2.01.03.03.01 ISS payable 35 49

2.01.05 Other Obligations 61,307 404,390

2.01.05.02 Others 61,307 404,390

2.01.05.02.01 Dividends payable 53,776 396,879

2.01.05.02.04 Other Current Liabilities 7,531 7,511

2.02 Non-Current Liabilities 33,337 32,821

2.02.02 Long-Term Liabilities 29,765 29,767

2.02.02.02 Others 29,765 29,767

2.02.02.02.03 Other Liabilities 29,765 29,767

2.02.04 Provisions 3,572 3,054

2.02.04.01 Tax, Labor and Civil Provisions 3,572 3,054

2.02.04.01.02 Civil and Labor Provisions 3,072 3,054

2.02.04.01.05 Regulatory Provisions 500 -

2.03 Shareholders' Equity 15,219,861 14,594,640

2.03.01 Paid up Capital 9,859,071 9,839,770

2.03.02 Capital Reserves 1,219,250 1,214,271

2.03.02.01 Offering's Goodwill 380,560 380,560

2.03.02.04 Stock Option 14,783 10,684

2.03.02.05 Treasury Stock (3,369) (3,369)

2.03.02.07 Reserve for Tax Benefits 827,276 826,396

2.03.04 Revenue Reserves 3,053,451 3,538,586

2.03.04.01 Legal Reserve 438,634 438,634

2.03.04.10 Reserve for expansion 2,614,817 3,099,952

2.03.05 Income/Losses Accumulated 1,086,076 -

2.03.08 Other Comprehensive Income 2,013 2,013



Parent Company Statements of Income


7

Account Code Account Description

Quarter - current

year 07/01/2014 to

09/30/2014

Year-to-date -

current year

01/01/2014 to

09/30/2014

Quarter - prior

year 07/01/2013 to

09/30/2013

Year-to-date - prior

year 01/01/2013 to

09/30/2013

3.04 Operating Revenues (Expenses) 358,728 1,095,521 314,573 1,010,085

3.04.02 General and Administrative (4,894) (18,454) (2,816) (11,476)

3.04.05 Other Operating Expenses (613) (630) (42) (343)

3.04.06 Equity Pick Up 364,235 1,114,605 317,431 1,021,904

3.05 Operating Income 358,728 1,095,521 314,573 1,010,085

3.06 Financial (10,399) (9,445) 473 (1,344)

3.06.01 Financial Revenues (1,395) 1,803 6,687 8,625

3.06.02 Financial Expenses (9,004) (11,248) (6,214) (9,969)

3.07 Income Before Taxes /Profit Sharing 348,329 1,086,076 315,046 1,008,741

3.08 Income Tax and Social Contribution - - (30) (2,101)

3.08.01 Current - - (30) (2,101)

3.09 Profit for the Period 348,329 1,086,076 315,016 1,006,640


3.99.01.01 Earnings per share basic 0.14411 0.44933 0.13034 0.41651

3.99.02.01 Earnings per share diluted 0.14402 0.44903 0.13031 0.41648



Parent Company Statements of Comprehensive Income


8

Account Code Account Description

Quarter -

current year

07/01/2014 to

09/30/2014

Year-to-date -

current year

01/01/2014 to

09/30/2014

Quarter - prior

year 07/01/2013

to 09/30/2013

Year-to-date -

current year

01/01/2013 to

09/30/2013

4.01 Profit (Loss) for the Period 348,329 1,086,076 315,016 1,006,640

4.02 Other comprehensive income - - - -

4.03 Comprehensive Income for the Period 348,329 1,086,076 315,016 1,006,640



Parent Company Statements of Cash Flow – Indirect Method


9

Account

Code Account Description

Year-to-date -

current year

01/01/2014 to

09/30/2014

Year-to-date -

current year

01/01/2013 to

09/30/2013

6.01 Net cash and cash equivalents generated by operating activities 842,793 744,797

6.01.01 Cash and cash equivalents generated by operating activities (16,689) (8,675)

6.01.01.01 Earning before income tax (EBIT) 1,086,076 1,008,741

6.01.01.02 Equity in results of investments (1,114,605) (1,021,904)

6.01.01.03 Provision for administrative and legal proceedings 443 2,328

6.01.01.04 Monetary fluctuation on escrow deposits and provision for administrative and legal proceedings

(297) 2,255

6.01.01.05 Monetary fluctuation on dividends 10,957 (204)

6.01.01.06 Stock options 737 109

6.01.02 Variations in assets and liabilities 859,482 753,472

6.01.02.01 Taxes and contributions recoverable 3,156 (47)

6.01.02.02 Dividends received 871,796 769,602

6.01.02.03 Escrow deposits (11,587) (13,713)

6.01.02.04 Other current and non-current assets (2,567) (1,304)

6.01.02.05 Labor obligations 980 816

6.01.02.06 Suppliers 456 (908)

6.01.02.07 Taxes and contributions (2,771) (2,105)

6.01.02.08 Other current and non-current liabilites 19 1,131

6.02 Net cash and cash equivalents generated by investment activities 3 (23)

6.02.02 Marketable securities 3 (23)

6.03 Net cash and cash equivalents used by financing activities (816,877) (735,809)

6.03.01 Dividends paid (835,849) (735,809)

6.03.02 Increase in capital stock 18,972 -

6.05 Increase on cash and cash equivalents 25,919 8,965

6.05.01 Beginning cash and cash equivalents balance 19,112 17,114

6.05.02 Ending cash and cash equivalents balance 45,031 26,079



Parent Company Statements of Changes in Shareholders´ Equity from 01/01/2014 to 09/30/2014


10

Account

Code Account Description Capital Capital Reserves

Revenues

Reserves

Retained

Earnings

Other

Comprehensive

Income

TOTAL

SHAREHOLDERS'

EQUITY

5.01 Beginning balance 9,839,770 1,214,271 3,538,586 - 2,013 14,594,640

5.03 Ajusted Beginning balance 9,839,770 1,214,271 3,538,586 - 2,013 14,594,640

5.04 Shareholder´s Transactions 19,301 4,099 (484,255) - - (460,855)

5.04.01 Increase in capital stock 19,301 - - - - 19,301

5.04.03 Stock option - 4,099 - - - 4,099

5.04.06 Dividends - - - - - -

5.04.09 Prescribed dividends - - 1,467 - - 1,467

5.04.10 Supplementary dividends - - (485,722) - - (485,722)

5.05 Total Comprehensive Income - - - 1,086,076 - 1,086,076

5.05.01 Profit for the Period - - - 1,086,076 - 1,086,076

5.06 Internal changes in shareholders´equity - 880 (880) - - -

5.06.04 Fiscal benefit reserve constitution - 880 (880) - - -

5.07 Ending balance 9,859,071 1,219,250 3,053,451 1,086,076 2,013 15,219,861



Parent Company Statements of Changes in Shareholders´ Equity from 01/01/2013 to 09/30/2013


11

Account

Code Account Description Capital Capital Reserves

Revenues

Reserves

Retained

Earnings

TOTAL

SHAREHOLDERS'

EQUITY

5.01 Beginning balance 9,839,770 383,631 3,609,469 - 13,832,870

5.03 Ajusted Beginning balance 9,839,770 383,631 3,609,469 - 13,832,870

5.04 Shareholder´s Transactions - 2,388 (397,556) - (395,168)

5.04.03 Stock option - 2,388 - - 2,388

5.04.06 Dividends - - (398,889) - (398,889)

5.04.08 Put option reversal - - 1,333 - 1,333

5.05 Total Comprehensive Income - - - 1,006,640 1,006,640

5.05.01 Profit for the Period - - - 1,006,640 1,006,640

5.06 Internal changes in shareholders´ equity - 451,401 (451,401) - -

5.06.01 Reserves constitution - 451,401 (451,401) - -

5.07 Ending balance 9,839,770 837,420 2,760,512 1,006,640 14,444,342



Parent Company Statements of Added Value


12

Account


Year-to-date -

current year

01/01/2014 to

09/30/2014

Year-to-date -

current year

01/01/2013 to

09/30/2013

7.02 Raw Material Acquired from Third Parties (9,822) (5,874)

7.02.02 Material, Energy, Services and Others (9,822) (5,874)

7.03 Gross Added Value (9,822) (5,874)

7.05 Net Added Value Produced (9,822) (5,874)

7.06 Added Value Received from Transfers 1,116,408 1,030,529

7.06.01 Equity Pick Up 1,114,605 1,021,904

7.06.02 Financial Revenues 1,803 8,625

7.07 Total Added Value to Share 1,106,586 1,024,655

7.08 Sharing Added Value 1,106,586 1,024,655

7.08.01 Labor 7,258 4,693

7.08.01.01 Cost of Working 6,383 4,125

7.08.01.02 Benefits 742 482

7.08.01.03 F.G.T.S 133 87

7.08.01.04 Others - (1)

7.08.02 Taxes, Fees and Contributions 1,879 3,229

7.08.02.01 Federal 1,863 3,210

7.08.02.02 State 1 6

7.08.02.03 Municipal 15 13

7.08.03 Earnings - Borrowed Capital 11,373 10,093

7.08.03.01 Interest 11,228 9,956

7.08.03.02 Rentals 145 137

7.08.04 Earnings - Owned Capital 1,086,076 1,006,640

7.08.04.03 Retained Earnings (Losses) 1,086,076 1,006,640



Consolidated Company Balance Sheet - Assets


13


1 Total assets 29,327,441 28,138,167

1.01 Current Assets 11,397,069 10,740,804

1.01.01 Cash and Cash Equivalents 5,427,870 5,287,642

1.01.03 Accounts Receivable 3,429,189 3,513,029

1.01.03.01 Clients 3,429,189 3,513,029

1.01.04 Inventories 306,619 296,829

1.01.06 Taxes and Contributions Recoverable 1,607,245 1,283,841

1.01.06.01 Current Taxes and Contributions Recoverable 1,607,245 1,283,841

1.01.06.01.01 Indirect Taxes and Contributions Recoverable 1,221,198 913,215

1.01.06.01.02 Direct Taxes and Contributions Recoverable 386,047 370,626

1.01.07 Prepaid Expenses 361,906 206,354

1.01.08 Other Current Assets 264,240 153,109

1.01.08.03 Others 264,240 153,109

1.01.08.03.01 Operations with derivatives 28,089 11,969

1.01.08.03.02 Other assets 234,626 141,140

1.01.08.03.03 Financial leasing 1,525 -

1.02 Non-Current Assets 17,930,372 17,397,363

1.02.01 Long-Term Assets 3,117,454 2,753,940

1.02.01.01 Financial assets at fair value through profit or loss 41,886 28,681

1.02.01.01.01 Available for Sale 41,886 28,681

1.02.01.03 Accounts Receivable 32,520 35,959

1.02.01.03.01 Clients 32,520 35,959

1.02.01.06 Deferred Taxes 948,743 1,064,721

1.02.01.06.01 Deferred Income Tax and Social Contribution 948,743 1,064,721

1.02.01.07 Prepaid Expenses 75,327 96,906

1.02.01.09 Other Non-Current Assets 2,018,978 1,527,673


1.02.01.09.04 Other Non-Current Assets 13,504 13,224

1.02.01.09.05 Escrow Deposits 945,058 720,261

1.02.01.09.06 Indirect Taxes and Contributions Recoverable 510,489 536,757

1.02.01.09.07 Direct Taxes and Contributions Recoverable 56,569 22,537

1.02.01.09.08 Financial leasing 192,325 -

1.02.03 Property, Plant and Equipment 8,393,996 8,207,242

1.02.03.01 Property, Plant and Equipment in Operation 7,843,601 7,491,091

1.02.03.03 Construction work in progress 550,395 716,151

1.02.04 Intangible 6,418,922 6,436,181

1.02.04.01 Intangibles 4,891,703 4,908,962

1.02.04.01.01 Concession licenses 1,493,477 1,698,545

1.02.04.01.02 Software rights 2,884,324 2,694,070

1.02.04.01.03 Other Intangibles 513,902 516,347

1.02.04.02 Goodwill 1,527,219 1,527,219



Consolidated Company Balance Sheet – Liabilities and Shareholders´ Equity


14


2 Total liabilities 29,327,441 28,138,167

2.01 Current Liabilities 7,108,018 8,048,103

2.01.01 Social and Labor Obligations 261,460 170,556

2.01.01.02 Labor Obligations 261,460 170,556

2.01.02 Suppliers - Trade Payable 4,262,636 5,255,337

2.01.02.01 Domestic Suppliers 4,132,796 5,142,934

2.01.02.02 Non-Domestic Suppliers 129,840 112,403

2.01.03 Taxes, rates and contributions 650,678 695,728

2.01.03.01 Federal Obligations 182,166 177,153

2.01.03.01.01 Income Tax and Social Contribution Payable 67,051 35,282

2.01.03.01.02 Other Taxes 115,115 141,871

2.01.03.02 State Obligations 432,921 475,430

2.01.03.02.01 ICMS 432,921 475,430

2.01.03.03 Other taxes 35,591 43,145

2.01.03.03.01 ISS 35,591 43,145

2.01.04 Loans and Financing 1,248,490 966,658

2.01.04.01 Loans and Financing 1,248,490 966,658

2.01.04.01.01 Domestic Currency 1,038,956 881,807

2.01.04.01.02 Other Currencies 209,534 84,851


2.01.05.02 Others 684,754 959,824

2.01.05.02.01 Dividends payable 53,776 396,879


2.01.05.02.05 Authorizations Payable 105,803 77,216

2.01.05.02.06 Other liabilities 492,123 431,754

2.01.05.02.07 Financial leasing 5,878 9,557

2.02 Non-Current Liabilities 6,999,562 5,495,424

2.02.01 Loans and Financing 5,136,548 3,779,998

2.02.01.01 Loans and Financing 5,136,548 3,779,998

2.02.01.01.01 Domestic Currency 3,459,832 2,008,834

2.02.01.01.02 Other Currencies 1,676,716 1,771,164


2.02.02.02 Others 726,401 704,684

2.02.02.02.03 Operations with derivatives - -

2.02.02.02.04 Indirect Taxes and Contributions Payable 92 86

2.02.02.02.05 Direct Taxes and Contributions Payable 226,043 226,668

2.02.02.02.07 Other liabilities 176,612 164,817

2.02.02.02.08 Financial leasing 323,654 313,113

2.02.03 Deferred Taxes 418,056 337,770

2.02.03.01 Deferred Income Tax and Social Contribution 418,056 337,770

2.02.04 Provisions 718,557 672,972



Consolidated Company Balance Sheet – Liabilities and Shareholders´ Equity


15

2.02.04.01 Tax, Labor and Civil Provisions 422,201 373,159

2.02.04.01.01 Tax Provisions 206,637 171,025

2.02.04.01.02 Labor Provisions 58,550 57,081

2.02.04.01.03 Benefits Provisions 1,084 1,084

2.02.04.01.04 Civil Provisions 111,326 88,385

2.02.04.01.05 Regulatory Provisions 44,604 55,584

2.02.04.02 Other Provisions 296,356 299,813

2.02.04.02.03 Asset Retirement Obligation 296,356 299,813

2.03 Shareholders' Equity 15,219,861 14,594,640

2.03.01 Paid up Capital 9,859,071 9,839,770

2.03.02 Capital Reserves 1,219,250 1,214,271

2.03.02.01 Offering's Goodwill 380,560 380,560

2.03.02.04 Options granted 14,783 10,684

2.03.02.05 Treasury stock (3,369) (3,369)

2.03.02.07 Tax benefit reserve 827,276 826,396

2.03.04 Revenue Reserves 3,053,451 3,538,586

2.03.04.01 Legal Reserve 438,634 438,634

2.03.04.10 Reserve for expansion 2,614,817 3,099,952

2.03.05 Accumulated Income (Loss) 1,086,076 -

2.03.08 Other Comprehensive Income 2,013 2,013



Consolidated Company Statements of Income


16

Account


Quarter -

current year

07/01/2014 to

09/30/2014

Year-to-date -

current year

01/01/2014 to

09/30/2014

Quarter -

prior year

07/01/2013 to

09/30/2013

Year-to-date -

current year

01/01/2013 to

09/30/2013

3.01 Net Operating Revenues from Goods Sold and/or Services Rendered 4,852,764 14,329,721 5,083,159 14,738,014

3.02 Cost of Goods Sold and/or Services Rendered (2,525,696) (7,382,397) (2,791,592) (8,085,473)

3.03 Gross Income 2,327,068 6,947,324 2,291,567 6,652,541

3.04 Operating Revenues (Expenses) (1,757,794) (5,217,251) (1,733,641) (4,989,381)

3.04.01 Sales (1,283,699) (3,820,340) (1,277,921) (3,692,940)

3.04.02 General and Administrative (286,954) (825,608) (253,787) (759,909)

3.04.04 Other Operating Revenues 15,109 37,645 12,584 40,721

3.04.05 Other Operating Expenses (202,250) (608,948) (214,517) (577,253)

3.04.05.01 Concessions' Amortization (82,945) (262,237) (80,781) (230,882)

3.04.05.02 Other Operating Expenses (119,305) (346,711) (133,736) (346,371)

3.05 Operating Income 569,274 1,730,073 557,926 1,663,160

3.06 Financial (74,336) (182,877) (90,237) (202,202)

3.06.01 Financial Revenues 174,530 620,352 17,755 517,159

3.06.02 Financial Expenses (248,866) (803,229) (107,992) (719,361)

3.07 Income Before Taxes /Profit Sharing 494,938 1,547,196 467,689 1,460,958

3.08 Income Tax and Social Contribution (146,609) (461,120) (152,673) (454,318)

3.08.01 Current (50,226) (264,857) (72,404) (234,010)

3.08.02 Deferred (96,383) (196,263) (80,269) (220,308)


3.11 Consolidated Profit for the Period 348,329 1,086,076 315,016 1,006,640

3.11.01 Atributted to shareholders 348,329 1,086,076 315,016 1,006,640

3.99.01.01 Earnings per share basic 0.14411 0.44933 0.13034 0.41651

3.99.02.01 Earnings per share diluted 0.14402 0.44903 0.13031 0.41648



Consolidated Company Statements of Comprehensive Income


17

Account


Quarter -

current year

07/01/2014 to

09/30/2014

Year-to-date -

current year

01/01/2014 to

09/30/2014

Quarter - prior

year 07/01/2013

to 09/30/2013

Year-to-date -

current year

01/01/2013 to

09/30/2013


4.03 Comprehensive Income for the Period 348,329 1,086,076 315,016 1,006,640

4.03.01 Atributted to Shareholder's 348,329 1,086,076 315,016 1,006,640



Consolidated Company Statements of Cash Flow – Indirect Method


18

Accont

Code Account description

Year-to-date -

current year

01/01/2014 to

09/30/2014

Year-to-date -

current year

01/01/2013 to

09/30/2013

6.01 Net cash and cash equivalents generated by operating activities 2,440,359 2,173,846

6.01.01 Cash and cash equivalents generated by operating activities 4,762,101 4,293,815

6.01.01.01 Earnings before income tax (EBIT) 1,547,196 1,460,958

6.01.01.02 Depreciation and amortization 2,250,014 2,044,811

6.01.01.03 Loss and disposal of fixed assets 5,803 9,526

6.01.01.04 Interest on ARO 2,644 4,256

6.01.01.05 Provision for administrative and legal proceedings 191,590 215,420

6.01.01.06 Monetary fluctuation on escrow deposits and provision for administrative

and legal proceedings 34,367 45,305

6.01.01.07 Interest and monetary and exchange variation on loans and other financial

adjustments 497,600 305,407

6.01.01.08 Monetary fluctuation on dividends 10,957 7,564

6.01.01.10 Allowance for doubtful accounts 211,326 195,884

6.01.01.11 Stock options 4,099 2,388

6.01.01.13 Interest on leasing payable 32,816 2,296

6.01.01.14 Interest on leasing receivable (26,311) -

6.01.02 Variations in assets and liabilities (2,321,742) (2,119,969)

6.01.02.01 Accounts receivable (80,448) (373,584)

6.01.02.02 Taxes and contributions recoverable (310,412) (261,644)

6.01.02.03 Inventories (9,790) (127,004)

6.01.02.04 Prepaid expenses (133,973) (194,187)

6.01.02.05 Escrow deposits (203,776) 150,917

6.01.02.06 Other current and non-current assets (89,006) (69,571)

6.01.02.07 Labor obligations 90,905 78,848

6.01.02.08 Suppliers (1,080,372) (135,885)

6.01.02.09 Taxes, fees and contributions payable (318,238) (630,540)

6.01.02.10 Provision for contingencies (197,935) (204,126)

6.01.02.11 Authorizations payable 28,276 (299,144)

6.01.02.12 Other current and non-current liabilities (16,973) (54,049)

6.02 Net cash and cash equivalents used by investing activities (2,626,889) (2,523,294)

6.02.01 Marketable securities (13,205) (4,602)

6.02.02 Additions to property plant and equipment and intangibles (2,607,583) (2,516,328)

6.02.03 ARO (6,101) (2,364)

6.03 Net cash and cash equivalents generated (used) by financing activities 326,758 (744,995)

6.03.01 New loans 1,925,191 1,053,324

6.03.02 Loans amortization (666,712) (1,124,649)

6.03.03 Dividends paid (835,850) (735,809)

6.03.04 Operations with derivatives (103,602) 62,163

6.03.06 Refund granted to shareholders - stocks group TIM Fiber RJ S.A. (19) (24)



Consolidated Company Statements of Cash Flow – Indirect Method


19

6.03.07 Financial payable leasing disbursement (11,222) -

6.03.08 Increase in capital stock 18,972 -

6.05 Increase (decrease) on cash and cash equivalents 140,228 (1,094,443)

6.05.01 Beginning cash and cash equivalents balance 5,287,642 4,429,780

6.05.02 Ending cash and cash equivalents balance 5,427,870 3,335,337



Consolidated Company Statements of Changes in Shareholders´ Equity from 01/01/2014 to 09/30/2014


20

Account

Code Account Description Capital

Capital

Reserves

Revenues

Reserves

Retained

Earnings

(Losses)

Other

Comprehensive

Income

TOTAL

SHAREHOLDERS'

EQUITY

Minority

Interest

Consolidated

SHAREHOLDERS'

EQUITY

5.01 Beginning balance 9,839,770 1,214,271 3,538,586 - 2,013 14,594,640 - 14,594,640

5.03 Prior year adjusted 9,839,770 1,214,271 3,538,586 - 2,013 14,594,640 - 14,594,640

5.04 Shareholder´s Transactions 19,301 4,099 (484,255) - - (460,855) - (460,855)

5.04.01 Increase in capital stock 19,301 - - - - 19,301 - 19,301

5.04.03 Options granted - 4,099 - - - 4,099 - 4,099

5.04.06 Dividends - - - - - - - -

5.04.09 Prescribed dividends - - 1,467 - - 1,467 - 1,467

5.04.10 Supplementary dividends - - (485,722) - - (485,722) - (485,722)

5.05 Comprehensive income statement - - - 1,086,076 - 1,086,076 - 1,086,076

5.05.01 Net income for the period - - - 1,086,076 - 1,086,076 - 1,086,076

5.06 Internal changes in shareholders´equity - 880 (880) - - - - -

5.06.04 Fiscal benefit reserve constitution - 880 (880) - - - - -

5.07 Ending balance 9,859,071 1,219,250 3,053,451 1,086,076 2,013 15,219,861 - 15,219,861



Consolidated Company Statements of Changes in Shareholders´ Equity from 01/01/2013 to 09/30/2013


21

Account

Code Account Description Capital

Capital

Reserves

Revenues

Reserves

Retained

Earnings

(Losses)

TOTAL

SHAREHOLDERS'

EQUITY

Minority

Interest

Consolidated

SHAREHOLDERS'

EQUITY

5.01 Beginning balance 9,839,770 383,631 3,609,469 - 13,832,870 - 13,832,870

5.03 Prior year adjusted 9,839,770 383,631 3,609,469 - 13,832,870 - 13,832,870

5.04 Shareholder´s Transactions - 2,388 (397,556) - (395,168) - (395,168)

5.04.03 Options granted - 2,388 - - 2,388 - 2,388

5.04.06 Dividends - - (398,889) - (398,889) - (398,889)

5.04.08 Put option reversal - - 1,333 - 1,333 - 1,333

5.05 Comprehensive income statement - - - 1,006,640 1,006,640 - 1,006,640

5.05.01 Net income for the period - - - 1,006,640 1,006,640 - 1,006,640

5.06 Internal changes in shareholders´ equity - 451,401 (451,401) - - - -

5.06.01 Reserves constitution - 451,401 (451,401) - - - -

5.07 Ending balance 9,839,770 837,420 2,760,512 1,006,640 14,444,342 - 14,444,342



Consolidated Company Statements of Added Value


22

Account

code Account description

Year-to-date -

current year

01/01/2014 to

09/30/2014

Year-to-date -

current year

01/01/2013 to

09/30/2013

7.01 Revenues 19,087,555 19,359,881

7.01.01 Net Operating Revenues from Goods Sold and/or Services Rendered 19,298,881 19,555,765

7.01.04 Allowance for doubtful accounts (211,326) (195,884)

7.02 Raw Material Acquired from Third Parties (8,067,500) (8,916,827)

7.02.01 Cost of Goods Sold and/or Services Rendered (5,278,851) (6,211,485)

7.02.02 Material, Energy, Services and Others (2,788,649) (2,705,342)

7.03 Gross Added Value 11,020,055 10,443,054

7.04 Retentions (2,250,014) (2,044,811)

7.04.01 Depreciation and Amortization (2,250,014) (2,044,811)

7.05 Net Added Value Produced 8,770,041 8,398,243

7.06 Added Value Received from Transfers 620,352 517,158

7.06.02 Financial Revenues 620,352 517,158

7.07 Total Added Value to Share 9,390,393 8,915,401

7.08 Sharing Added Value 9,390,393 8,915,401

7.08.01 Labor 573,920 506,995

7.08.01.01 Cost of Working 411,271 361,417

7.08.01.02 Benefits 113,778 102,693

7.08.01.03 F.G.T.S. 38,568 33,449

7.08.01.04 Others 10,303 9,436

7.08.02 Taxes, Fees and Contributions 6,515,318 6,318,006

7.08.02.01 Federal 2,412,729 2,388,823

7.08.02.02 State 4,090,814 3,918,486

7.08.02.03 Municipal 11,775 10,697

7.08.03 Earnings - Borrowed Capital 1,215,079 1,083,760

7.08.03.01 Interest 800,240 714,901

7.08.03.02 Rentals 414,839 368,859

7.08.04 Earnings - Owned Capital 1,086,076 1,006,640

7.08.04.03 Retained Earnings (Losses) 1,086,076 1,006,640

Earnings Release

23

TIM PARTICIPAÇÕES S.A. Announces its Consolidated

Results for the Third Quarter of 2014

BM&FBOVESPA*

(lot = 1 share)

TIMP3: R$ 13.45

NYSE*

(1 ADR = 5 ON shares)

TSU: US$26.52 (*) closing prices of

November 4th, 2014

Rio de Janeiro, November 4th, 2014 – TIM Participações S.A. (BOVESPA: TIMP3;

and NYSE: TSU), the company which controls directly TIM Celular S.A. and Intelig

Telecomunicações Ltda., announces its results for the third quarter of 2014. TIM

Participações S.A. (“TIM Participações” or “TIM”) provides telecommunication services

with a nationwide presence in Brazil.

The following financial and operating consolidated information, except where

otherwise indicated, is presented according to IFRS (International Financial Reporting

Standards) and in Brazilian Reais (R$), pursuant to Brazilian Corporate Law. All

comparisons refer to the third quarter of 2013 (3Q13) and second quarter of 2014

(2Q14), except when otherwise indicated.

Investor Relations

Contacts

[email protected] Twitter: @TIM ri

www.tim.com.br/ir (+55 21) 4109-3360 /

4109-4017 / 4109-3751 /

4109-3446

TIM IR App:

Operational Highlights

Data users grew 32% YoY and reached 43% of total base, with

3G users at 31.4 mln in July/14 (+68% YoY);

Postpaid customer base mix stood at 16.4% in August/14, up

from 16.1% in 3Q13;

Bad debt under control at 0.8% of gross revenues;

Network infrastructure improvements, with Mobile BroadBand

plan reaching 81 cities and becoming top 1 operator in number of 4G

cell sites in state capital cities;

Live TIM customer base reached ~120k users, adding 24.4k

clients in 3Q14, and reaching 31% of net share in São Paulo and Rio

de Janeiro. Addressable households reached ~1.4 mln homes;

Financial Highlights

Net revenues of “business generated” (outgoing+VAS) grew

by 5% YoY in 3Q14.

Gross data revenues accelerated to 23% YoY, reaching

R$1.68 bln, or 29% of mobile gross service revenues;

Significant improvements on fixed business performance;

Strong cost control with total opex reduced by 8% YoY;

Solid EBITDA growth of 6% YoY, reaching R$1.33 bln. EBITDA

margin came at 27.4% and Service margin (ex-handset) at 34.1%;

Net Income in 3Q14 totaled R$348 mln, an increase of 10.6%

YoY.

mailto:[email protected]

http://www.tim.com.br/ir

Earnings Release

24

MESSAGE FROM CEO

Dear Shareholders and Analysts, As we close the third quarter, our view on the major change towards data services in our business follows its confirmation path and continues to evolve in a very solid pace. With that key strategic direction in mind, we remained focused on the execution of our main priorities, and not only were able to again observe great progress in the development of our infrastructure and data related offers and results, but were also successful in securing our position in the future of mobile broadband by winning one of the 700MHz 4G Spectrum Licenses auctioned by Anatel last September. Additionally to that, we were also pleased to obtain significant progress in our fixed business results, with Live TIM overcoming 120 thousand subscribers and nearly 1.4 million homes passed while being recognized as Brazil's best broadband service, and TIM Soluções Corporativas returning to sales and EBITDA growth and integrating fixed and mobile solutions in our business portfolio. Infrastructure All of the effort has been concentrated to make sure that our strategic priority “Network and Quality” evolves as planned. The Mobile Broadband Plan continues to be expanded and has reached 81 cities or over 36% of urban population; the use of 900Mhz spectrum in Sao Paulo has been crucial for our significant quality improvement. The Network team continues to be reinforced, and with it the deployment of new cell sites and core infrastructure. With that, all of our quality metrics remain in constant improvement and at or above all of the market averages. 4G Auction TIM assured its solid position as one of the main players in the future of mobile data in Brazil by acquiring the much awaited LTE spectrum on 700MHz in the recent Anatel auction. We were successful in acquiring our spectrum block of choice at very close to the minimum price of R$1.9 billion, and given its characteristics such as technical efficiency, it will be used to expand our already very successful position in 4G as data keeps advancing to secure our long term growth and sustainability. Continued Offer Innovation Our portfolio also successfully followed its transformation path in Q3, with a major change on our pre-paid offer through the introduction of Infinity Day as our default voice platform, as well as the successful growth of Infinity Turbo 7, which brought the convenience of Voice + Internet + SMS in a weekly top up

Earnings Release

25

charge. Our new ‘Controle’ data offers also started to gain traction, and VAS services remain a key contributor for growth. Third Quarter Highlights As expected, Q3 incoming revenues were impacted by the continued effect of MTR (Mobile Termination Rate) reductions and also by the SMS decline observed for the industry as a whole. However, all of the key indicators of our long term business performance remained very healthy, with outgoing revenues (or ‘business generated’) presenting solid growth, driven in particular by data services, which posted excellent evolution on all fronts: customer base growth, data and VAS usage and smartphone penetration in our base. Another positive highlight in the quarter was the relentless attention to efficiency and cost control which helped EBITDA margin to increase 282 basis points from 3Q13, delivering an impressive 6.4% YoY EBITDA growth. Conclusions & Perspectives In conclusion, our third quarter demonstrated again the resilient performance of our business strategy, with solid results fueled by data services and an efficient operation even in face of a more challenging revenue growth scenario while we transition through a revenue profile transformation. As we prepare to close the year, our attention remains focused on our long term strategy in search of broadband and digital services leadership, based on a robust infrastructure, an evolving portfolio and a very efficient operation. As part of this process, we have recently redefined our Mission Statement, which is now "To connect and take care of every customer, so everyone can do more", and based on it we are setting our three year plan for the period 2015-2017. We expect the continuation of a very successful journey, and believe we have all of the required levers to achieve it. Rodrigo Abreu CEO

Earnings Release

26

MARKETING PROGRESS

Leveraging on innovation: Pay per Day Offer Concept

In Q3, TIM launched TIM Day voice offer, which consists in one token for all day usage

within TIM network (local and LD). The offer provides up to 300 minutes of use for

R$0.75 per day. The offer is structured to charge for the first call and leave the whole

day usage without additional charge. If a client exceed the 300 minutes cap, he/she

will be charged R$0.25 per unlimited call within the Infinity plan mechanics.

TIM Turbo 7: Pre-paid weekly package

Launched in the end of 2Q14, Infinity Turbo 7 has been showing good traction, with

overall top-up increasing and encouraging ARPU improvement.

Some price repositioning: Signal of rationality

Aiming a price re-alignment, TIM upgraded its daily data plan for pre-paid users

(10MB+SMS), from R$0.75/day to R$0.99/day. As a secondary data offer, clients may

continue to use on a separate basis data or SMS, paying R$0.75 (repriced from R$ 0.60

at the beginning of November) day for each service.

Boosting Data Usage for pre-paid: adding more value to TIM clients

This quarter, TIM continued to develop innovative products to incentivize data usage.

On August, the Company announced a partnership with one of the most recognized

language school chains in Brazil (Wizard). The service is offered in three different plans

where users will be able to (i) access the material through SMS or mobile website

paying R$1.99 per week; (ii) additionally have access to voice content by R$2.99 per

week, and (iii) access the TIM Wizard app which combines all contents plus learning

games by R$3.99 per week.

On July, TIM launched new plans for Machine-to-Machine (M2M) business, offering

both 3G and 4G technologies to meet demand of more specific markets. The new plans

offer capacities that range from 20MB to 2.5GB per access, taking the opportunity of

the new government decision to reduce Fistel taxes for M2M segment.

Handsets

This quarter, TIM started to sell three new smartphones, the second generation of

Moto X and Moto G from Motorola and the G3 from LG. With prices ranging from

R$729 to R$1,499 these handsets feature 5’’ or higher touch screens, up to 13MP

cameras and 16GB internal memory. At the time of the purchase, clients are being

incentivized to buy the handsets contracting the Liberty+200 (R$129.90) plan plus the

data package of 1GB (R$49.90) to keep boosting data usage. This is also in line with

the Company’s strategy to enable its customer base for data access, especially for the

use of 4G technology, which is compatible with both LG G3 and the second generation

of Moto X. All devices sold by TIM are unlocked and can be paid in 12 installments

using a credit card.

Earnings Release

27

FIXED BROADBAND: LIVE TIM

Marketing Update: New fixed ultra broadband plan at 70Mbps

Live TIM launched a new fixed ultra broadband plan, offering 70Mbps speed for

download and 30Mbps for upload. The plan cost R$119.90 per month and includes a

free of charge modem with Wi-Fi router. Without any loyalty clauses, membership fee

or installation costs, the plan further expands Live TIM portfolio speeds, which already

includes 35Mbps (R$69/month), 50Mbps (R$89/month) and 1Gbps (R$1,499/month)

speeds. Services are available at the cities of São Paulo, Rio de Janeiro, Duque de

Caxias and Nova Iguaçu.

Operation Update: Net adds speed-up

Live TIM finished the third quarter of 2014 with almost 120 thousand users, adding

24.4 thousand new clients, with most of our customers in the 35Mbps offer.

Additionally, the 70Mbps offer launched in July, already accounts for 1% of all Live TIM

customers. Speeds are guaranteed at rate of 80% of contract speed and current

average speed is at 39.7Mbps per connection, way above market average of 2.6Mbps.

It’s worth mentioning that the good results achieved are based, mainly, on the quality

of the service, which reflects customer’s satisfaction level as above market’s average.

At the end of the 3Q14, Live TIM had approximately 15.6 thousand buildings

connected (vs. 7.7 thousand in 3Q13), pointing to an addressable market of over 1.3

million clients in São Paulo and Rio de Janeiro. Prospect clients registered in Live TIM´s

website reached more than 776k (vs. 400k in 3Q13).

Earnings Release

28

OPERATIONAL PERFORMANCE

BRAZILIAN MARKET OVERVIEW

Brazilian mobile market reached 277.41 million lines in August 2014, representing a

yearly growth of 3.3%, while penetration rate stood at 136.7%, up from 135.5% in the

same month last year. The reduction in pace for subscriber growth is a result of: i)

already high penetrated market, people using multiple SIM-cards and ii) a less dynamic

economic environment. Nonetheless, the mobile market growth is still supported by

machine-to-machine business and migration from prepaid to postpaid segment.

Considering the most recent data available for 3Q14 (July and August), overall market

net additions totaled 1.7 million lines, down by 37% when compared to the same

period last year, due to a deceleration in July 2014 as a result of the World Cup.

Postpaid and prepaid segment performance follows bellow:

Postpaid segment reached 64.6 million lines in August (+14.8% versus

Aug/13).

Prepaid segment reached 212.9 million lines (+0.3% YoY), accounting

for 76.7% of total Brazilian market.

Earnings Release

29

TIM’s PERFORMANCE

TIM’s subscriber base ended August 2014 with 74.7 million lines, 2.4% up compared

with the same period last year. Market share posted a timid reduction reaching 26.93%

(vs. 27.17% a year ago).

Regarding disclosure by technology, in July/14 (most recent data available) TIM total

subscriber base with 3G devices reached 31.4 million users, a 67.9% increase against

the same period last year. Market share in 3G reached 25.61% (vs. 25.37% in

July/13).

As for the 4G subscriber base, TIM reached an important milestone of 1.1 million users

in July/14, posting a net add of 111k users MoM, an increase of 11.2% over June/14.

It’s also important to highlight that TIM posted market share expansion reaching

29.96% in July/14 vs. 25.73% in the same period of last year. An evidence that the

Company’s strategy on 4G is paying off.

Earnings Release

30

As for gross additions, in July+August TIM registered 6.7 million of new lines, down by

3.5% when compared to the same period last year. Disconnections amounted 6.2

million lines in the period, a decrease of 0.3% YoY when compared to the same period

of last year. As a result, net additions totaled 501.6k (vs. 729.1k on the same period of

last year), following our austere disconnection policy.

In August/14, postpaid customer base reached 12.3 million users, a 4.4% growth over

the same period last year (vs. 13.4% in Aug/13). In the first two months of the

quarter, TIM showed net adds of 29k users in Postpaid segment (vs. 357k net adds in

the same period last year). Disclosure by technology will be shown as of July/14, the

most recent data available by Anatel.

Voice and data (smartphones) postpaid users reached 11.0 million

(+5.6% YoY)

Machine-to-machine business reached 1.3 million accesses (+5.1% YoY)

Mobile broadband (modems and tablets)

reached 572 thousand accesses (-21.7%

YoY)

As for the prepaid segment, in August/14, TIM

reached 62.4 million users, up 2.1% YoY, with

“Infinity Pré” accounting for 60.3 million users or

96.2% of the prepaid customer base. TIM continues

to lead the prepaid market in Brazil, due its

innovative pioneering position and transparent

concepts.

Earnings Release

31

QUALITY AND NETWORK

QUALITTY DEVELOPMENTS

As for network quality KPI’s, we will be showing this quarter voice and data indicators

disclosed by Anatel until April/14, being the figures for 3Q14 internal estimates. All

metrics shown below stood within the agency’s target, with relevant quality

improvements in the Drop Data Connection (3G) indicator in 3Q14e when compared to

3Q13.

As for caring quality indicators,

TIM’s group (mobile and fixed)

kept the position of being the

least claimed at the consumer’s

protection agencies (PROCON -

SINDEC1), with a volume of

complaints 74% lower than the

most demanded peer.

1 SINDEC is the National Information System of Consumer Protection, which integrates 357 agencies (PROCONs). It is

estimated that these PROCONs represent 42% of total claims. Figures consider both mobile and fixed business.

Earnings Release

32

In the third quarter of 2014, TIM continued moving forward its Quality Plan, with a

cut-edge quality approach, which remains on track to arrive in 600 cities by the year

end. It has already showed improvements on the network quality indicators,

accompanied by a revision and development of customer care processes. These

initiatives resulted in a significant reduction of 11% on monthly average network

complaints at Anatel (network repair + call completion) in 3Q14 when compared to the

same average of 3Q13.

NETWORK EVOLUTION

As for network evolution, more than 1.8k TRXs (elements for voice), coupled with close

to 133k data channel elements and 1.5k km of optical fiber were implemented. These

elements implementation along with other network improvements – such as sites

densification, WiFi and small cell expansion, backhauling infrastructure development,

cell-site fine tuning and others – are allowing the Company to keep improving its

network quality.

The Wi-Fi project is at a good pace. TIM added 46 new hotspots in the third quarter of

2014, mainly in São Paulo state. Also, TIM Wi-Fi is now available in 22 airports of 13

states.

The Mobile BroadBand (MBB) plan reached 83 cities in 3Q14, adding 17 cities

compared to the 2Q14. The average throughput gain for the cities that have completed

the MBB is remarkable, proving the efficiency approach used by the project, tackling

Access (HSPA+ and dual carrier), Transport (backhaul and backbone using FTTS and

high capacity microwave links), and IP-Core (caching, peering and transit).

The FTTS project, which is one of the pillars of the MBB Plan, has added more 31 cities

in the implementation roll out for this year.

GSM coverage totaled 94.9% of the urban population in the third quarter of 2014,

serving 3,432 cities. 3G coverage reached 73 new cities in 3Q14, serving 1,248 cities or

79.1% of the urban population in Brazil (versus 78.8% in 3Q13). TIM performed an

excellent implementation plan in the third quarter of 2014 and will keep the pace to

increase the 3G coverage in 2014’s remaining quarter. As for the 4G, TIM already

covers 35.6% of the Brazilian urban population, stable when compared to the 2Q14.

700 MHz AUCTION

Last September TIM acquired the “Block 2” of 700Mhz spectrum for LTE. It is

important to notice that the strategy adopted was successful, paying a price close to

minimum bid (1% premium), and guaranteeing its presence in the sector’s future

evolution. Investment on the auction will reach up to approximately R$ 2.9 billion,

including clean-up cost.

Earnings Release

33

It is worth mentioning that the 700 MHz spectrum is much more efficient than the

2,500 MHz, band that is currently being used for the 4G service. Additionally, the

“Block 2”, which TIM has acquired, shows potential for economy of scale regarding

equipment, relying also on the synergy of the APT blocks and European digital

dividend.

CORPORATE SOCIAL RESPONSIBILITY This quarter, “Instituto TIM” (TIM Institute) partnered with the “Círculo de Matemática

do Brasil” project (“The Math Circle”) to develop a learning program on the public

schools of Rio de Janeiro. The project is designed by professors Bob and Ellen Kaplan

from Harvard University and aims to stimulate learning of mathematics on students

from seven to nine years old in a playful and interactive manner. Covering

approximately 60 public schools throughout Brazil and more than 7 thousand students

benefited, the project is being brought to Rio de Janeiro by “Instituto TIM” in

partnership with the city’s Municipal Education Secretary, which estimates that the

initiative could reach up to 750 students in its first wave.

TIM was recognized by its commitment with the society and climate changes, being

awarded the gold seal from GHG Protocol – the Center of Sustainability Studies

program from FGV (Fundação Getúlio Vargas) Institute – for the third consecutive

year. The program seeks to encourage companies to publish their emission inventories

of greenhouse gas (GHG) through technical and institutional capacity building,

awarding a gold seal to companies that publish their full emissions report audited by

an independent third party.

Earnings Release

34

FINANCIAL PERFORMANCE

OPERATING REVENUES

Total gross revenues in the quarter reached R$7,228 million (-4.1% YoY), driven by a

strong impact from MTR cut and SMS (interconnection revenues fell -34.1% YoY). However,

‘business generated’ performance (outgoing voice + data usage) came at +2.1% YoY.

Gross revenues breakdown and other highlights in 3Q14 are presented as follows:

Mobile usage and monthly fee gross revenues reached R$2,738 million, -

5.1% YoY and impacted by the macroeconomic environment and the migration from

voice to data use.

Value Added Services

(VAS) gross revenues

totaled R$1,677 million,

again a solid double digit

growth of 23.1% YoY,

showing an acceleration

versus first and second

quarter of 2014, +20.4% and

+22.4% YoY, respectively.

Strong adoption of new data

plans and successful launch of

new VAS offers were the

drivers for such performance.

Data users have reached 43%

of our total base (vs. 33% in

3Q13).

As percentage of mobile gross service revenues, VAS reached 29% in 3Q14 vs. 23% in 3Q13.

Earnings Release

35

Long distance gross revenues came at R$761 million in 3Q14, a drop of

8.6% YoY, mainly due to the LD traffic reduction to fixed destination.

Interconnection gross revenues in 3Q14 dropped 34.1% YoY to R$606 million

due to the impact of MTR cut and reduction of incoming SMS revenue.

Fixed business gross revenues, including Intelig, totaled R$232 million (-9.7

YoY), showing a strong reduction in pace from previous quarters (-24.6% YoY in Q1

and -22.3% YoY in Q2). This result is mainly due to Intelig restructuring process, as

well as Live TIM broadband gaining importance in the fixed revenue segment.

Product sales gross revenue declined by 6.6% YoY, reaching R$1,147 million

in this quarter. This

performance is mainly explained

by a macroeconomic

environment. The number of

devices sold in the quarter was

broadly stable year-over-year to

3.2 million of devices.

Total net revenues reached

R$4,853 million in 3Q14, a drop

of 4.5% on a year-over-year

basis. Total net services

revenues came at R$4,045

million in 3Q14 and -3.8% YoY. For a better understanding of business operational

performance, excluding MTR cuts effects, total net

services revenues would have increased +0.4%,

totaling R$4,225 million.

Despite the MTR impact on total net services

revenues, as shown below, the relevance of this

regulatory measure have been decreasing

significantly, achieving its lowest level, at approximately 12%.

Earnings Release

36

ARPU (average revenue per user) reached R$17.4 in 3Q14, down -6.3% YoY,

largely impacted by MTR cut aforesaid. The “business generated” performance partially

off-set the MTR cut and ARPU ex-MTR would have fallen 2,0% YoY. MOU (minutes

of use) reached 136 minutes in this quarter, down -9.5% YoY when compared to

3Q13. Mainly due to the reduction on LD traffic.

OPERATING COST AND EXPENSES

In 3Q14, operating costs and expenses totaled R$3,521 million, a decrease of

8.1% YoY, mostly explained by a strong performance of network & interconnection

costs (-20.7% YoY).

Operating expenses breakdown in 3Q14 is presented as follows:

Personnel expenses reached R$249 million in 2Q14, a growth of 17.5% when

compared to the same period last year, driven mainly by the increase of 700 people or

+6% versus a year ago. Total number of employees reached 12.522 people in the

3Q14. Network expansion and insource program, together with owned stores growth

(from 142 in 3Q13 to 166 stores in 3Q14) were the main source of hiring in the period.

Also, the Company adjusted salaries near to inflation on top of others benefits

adjustments.

Selling & Marketing expenses amounted to R$1,023 million in 3Q14, a

decrease of 1.2% versus the same period last year, due to less expenditures on

commissioning, shipping customer’s bills and handset distribution cost. These effects

more than compensated higher advertising cost in the period.

Network & Interconnection costs reached R$1,065 million in 3Q14, a sound

saving of 20.7% on a yearly comparison, driven mostly by MTR, voice/SMS off-net

traffic reduction and leased lines’ costs reduction. Total voice traffic came lower by

7.2% YoY while total bytes of use rose 40% when comparing August-2013 to August-

2014, following data plans performance.

General & Administrative expenses (G&A) amounted to R$167 million in

3Q14, an increase of 7.4% YoY, mainly due to expenses on legal advisor services

related to the tower sale process and higher nondeductible fines.

Earnings Release

37

Cost of Goods Sold reached R$854 million in 3Q14, a decrease of 5.9% versus

the same period of last year due to the lower unitary cost and stable volume of

handsets sold.

Bad Debt expenses increased 4.6% YoY in 3Q14 to R$58 million. However

TIM kept the benchmark performance, despite an improvement in the postpaid mix

from 16.1% in August/13 to 16.4% in August/14. Bad debt expenses as a percentage

of gross revenues stood at 0.80% (vs. 1.08% in 2Q14).

Other operational expenses reached R$104 million in 3Q14, a decrease of

14.0% vs. 3Q13 mainly due to lower costs of mobile tax FUST/FUNTTEL in the quarter

and reduction with provisions for contingencies.

Subscriber Acquisition Costs (where SAC = subsidy + commissioning + total

advertising expenses) came at R$31.1 in 3Q14, an increase of 11.8% YoY due to

an increase in advertising and promotions. SAC/ARPU ratio (indicating the payback per

customer) reached 1.8x, an

increase versus 1.5x vs. the

same period of 2013.

EBITDA

EBITDA (Earnings Before

Interest, Taxes, Depreciation

and Amortization) totaled

R$3,980 million in 9M14, an

increase of 7.3% when

compared to R$3,708 million

in the same period last of

year. In 3Q14, EBITDA

reached R$1,332 million,

6.4% higher than 3Q13. Improving EBITDA performance has been supported by a

better contribution margin2 (+5% YoY) as value added services continue to play a key

role, along with a lower off-net traffic cost for voice and SMS and savings on network

cost.

EBITDA margin also showed once again a significant improvement of 262bps in 9M14,

reaching 27.8% vs. 25.2% in 9M13. As for the quarter analysis, EBITDA margin

came at 27.4%, up from 24.6% in 3Q13.

EBITDA margin on services (excluding handset revenues and costs) came at 33.9% in

9M14, up by 309bps when compared to 30.8% in 9M13. In 3Q14, EBITDA margin

2 Contribution Margin = Net service revenues - Interconnection

Earnings Release

38

on services reached 34.1%, up by 358bps when compared to the same period last

year, 30.5%.

Excluding MTR cut impact, EBITDA would have been R$1,441 million in 3Q14,

representing a 15.1% yearly growth. It is also important to highlight that EBITDA

exposure to the MTR revenues have been constantly dropping achieving on this

quarter the lowest level, at close to 18% of the EBITDA.

EBIT

EBIT (earnings before interest and taxes) totaled R$1,730 million in 9M14, up 4.0%

when compared to 9M13 and with EBIT margin at 12.1% (vs. 11.3% in 9M13). In the

3Q14 analysis, EBIT reached R$569 million, +2.0% YoY, with EBIT margin at

11.7% vs. 11.0% in 3Q13.

Depreciation and Amortization totaled R$2,250 million in 9M14, up 10.0% YoY versus

the same period of 2013. As for the 3Q14, depreciation and amortization amounted

R$763 million and 9.9% higher than 3Q13.

NET FINANCIAL RESULT

Net financial result came at -R$183 million in 9M14, a reduction of 9.6% vs. -R$202

million in 9M13. In 3Q14, net financial result came at -R$74 million or -17.6%

YoY due to higher Financial Revenues (R$192 million, +55.8% YoY), largely impacted

by higher interest on cash position. This performance more than offsetted higher

Financial Expenses (R$267 million, +27.8% YoY), as a consequence of an increase in

monetary adjustments and interest on loans. It is also important to point out that

average cash yield reached 10.95% (compared to 8.41% in 3Q13) and that the

average cost of debt totaled 9.46% in 3Q14 compared to 7.91% in 3Q13.

INCOME AND SOCIAL CONTRIBUTION TAXES

Income and Social Contribution taxes came at R$461 million in 9M14, fairly stable

when compared to R$454 million in 9M13. Considering only 3Q14 results, Income

Tax came at R$147 million and 4.0%

lower than 3Q13. Effective tax rate

dropped 302bps to 29.6% in 3Q14 (vs.

32.6% in 3Q13). In 9M14, effective tax

rate stood at 29.8%, a decrease of

129bps versus same period of last year.

NET INCOME

Net Income totaled R$1,086 million in

9M14, a solid increase of 7.9% versus

R$1,007 million in 9M13. In the 3Q14,

net income totaled R$348 million (+10.6% YoY), with EPS (Earnings per Share) at

R$0.14 in 3Q14 (vs. R$0.13 in the same period last year).

Earnings Release

39

CAPEX

Investments totaled R$2,617 million in the nine months of 2014, a decrease of 5.5%

versus the same period of last year. As for the 3Q14, Capex totaled R$960

million, down by 18.3% compared to 3Q13. The yearly decrease is explained by

different implementation rollouts and the anticipation of investments in 2013 due to

the World Cup.

It’s worth highlighting that more than 94% of the total Capex has been dedicated to

infrastructure, confirming the commitment to improve availability and quality of

services.

DEBT, CASH AND FREE CASH FLOW

Gross Debt reached R$6,219 million in 3Q14, including the first disbursement in

2Q14 of R$1,749 million by BNDES to help financing CAPEX 2014-15. Excluding this

effect, gross debt would decrease 6.5% when compared to the R$4,781 million by the

end of 3Q13.

Company's debt is concentrated in long-term contracts (82% of the total) composed

mainly by financing from BNDES (Brazilian Economic and Social Development Bank)

and EIB (European Investment Bank), as well as borrowings from other top local and

international financial institutions.

Approximately 29% of total debt is denominated in foreign currency (USD), and it is

100% hedged in local currency. The average cost of debt totaled 9.46% in 3Q14

compared to 7.91% in 3Q13 due to an increase of interest rate. Nevertheless, this

increase in cost was more than offsetted by the rise of cash yield in the same period,

as described below.

Cash and Cash equivalents totaled R$5,428 million by the end of 3Q14, an

increase of 63% when compared to 3Q13 due to the first disbursement from BNDES

aforesaid. Excluding this effect, cash and cash equivalents would be up by 10.3% vs.

3Q13. Average cash yield reached 10.95% (compared to 8.41% in 3Q13).

Considering those movements, net debt improved from R$1,446 mln in 3Q13

to R$791 mln in 3Q14. Considering also the last 12 months EBITDA, net

debt/ebitda ratio stood at 0.14x.

As for the Operating Free Cash Flow in 9M14, it came positive at R$275

million, compared to a negative R$163 million in 9M13. In 3Q14, OFCF reached

R$884 million, representing a yearly drop of 16.9%, mainly driven by a decrease in

accounts payable due to higher supplier payments.

Earnings Release

40

Net Cash Flow in 9M14 totaled -R$1,212 million an increase of 24% compared

to same period of last year. In the third quarter of 2014, it came at positive R$240

million, a decrease from the R$538 million in 3Q13.

Excluding the leasing effect from the backbone project in Amazonas (known as LT

Amazonas), Operating Free Cash Flow would be at R$93 million in 9M14 and Net Cash

Flow would totaled -R$1,402 million.

Earnings Release

41

STOCK PERFORMANCE

TIM Participações's common stocks are traded on BM&FBOVESPA under the ticker TIMP3 and ADRs are traded on NYSE under the ticker TSU. TIMP3 ended 3Q14 at R$12.89, up by 4.5% when compared to the end of 2013 versus an appreciation of 5.1% in the Bovespa Index (Ibovespa) in the same period. The Company's ADRs closed Q3 at US$26.20, a decrease of 0.2% over the end of 2013,.

Earnings Release

42

OWNERSHIP BREAKDOWN

Earnings Release

43

ABOUT TIM PARTICIPAÇÕES S.A.

TIM Participações S.A. is a holding Company that provides telecommunication services all across Brazil through its subsidiaries, TIM Celular S.A. and Intelig Telecomunicações LTDA. TIM Participações is a subsidiary of TIM Brasil Serviços e Participações S.A., a Telecom Italia group Company. TIM launched its operations in Brazil in 1998 and consolidated its nationwide footprint in 2002, thus becoming the first wireless operator to be present in all of Brazilians states. TIM provides mobile, fixed and long distance telephony as well as data transmission services, with the focus always on the quality of the services offered to clients. Today, TIM has a nationwide reach of approximately 96% of the urban population, with presence in 3,432 cities. TIM also provides extensive data coverage services in the country, based on a Third Generation (3G) network serving 79% of the country’s urban population, in addition to a fast growing,state of the art Fourth Generation (4G) network. The Company has 450 network agreements available for international roaming of TIM clients in more than 200 countries across six continents. The TIM brand is strongly associated with innovation and quality. During its presence in the country, it has become the pioneer in a diversity of products and services, such as MMS and Blackberry in Brazil. Continuing this trend, it renewed its portfolio in 2009 to position itself as the operator that devises “Plans and Promotions that Revolutionize”. It launched two families of plans – ‘Infinity’ and ‘Liberty’. The new portfolio is based on an innovative concept, with a great deal of incentive to use (billing by call, billing by day, unlimited use) and constantly explores the concept of TIM community, with 74.7 million lines in Brazil. This innovation continued with the introduction of pre-paid data plans, Liberty Controle plans and several Value Added Service offers in content and appications, such as TIMmusic and TIMprotect. In December 2009, the Company concluded the merger of 100% of Intelig, which provides fixed, long distance and data transmission services in Brazil. This merger supports the expansion of TIM´s infrastructure, a combination that allows to speed up the development of the 3G and 4G networks, to optimize the cost of renting facilities, and also to improve our competitive positioning in the telecom market. In accordance with our commercial strategy of expansion of activities and strengthening of the Company’s infrastructure, its wholly-owned subsidiary TIM Celular acquired TIM Fiber RJ and SP, both merged into TIM Celular in 2012. Both Companies are providers of infrastructure and solutions to high performance communications, which serve the main municipalities of the metropolitan areas of the States of Rio de Janeiro and São Paulo, encompassing a potential market of approximately 8.5 million homes and more than 550 thousand companies in 21 cities, through an optical fiber network of 5.5 thousand kilometers, which today supports the fast expansion of our Mobile Broadband infrastructure in those two cities, in addition to the vast construction of our own fiber network in all of the key cities in Brazil as we expand our Mobile Broadband offers. In September 2014, TIM has also become one of the winners of the most recent 4G spectrum auction carried out by Anatel for the 700MHz frequency band, securing its future as a key player in mobile data in the country.

TIM Participações is a publicly-held Company, whose share are listed on the São Paulo Stock Exchange (BM&FBOVESPA) and ADRs (American Depositary Receipts) are listed on the New York Stock Exchange (NYSE). TIM is also included in a selective group of companies of the Corporate Sustainability Index (ISE) and the only telecom Company in Novo Mercado segment of BM&FBOVESPA.

» Consolidated company with a nationwide footprint since 2002

» Network: excellent coverage and quality in 2G, 3G and 4G

» Innovative offers: new concepts leveraging TIM community

» Brand: associated to innovation

» Sustainability: Maintained in ISE index for 2014/2015

» Is listed in Novo Mercado since

August 2011

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44

DISCLAIMER

This document may contain forward-looking statements. Such statements are not statements of historical fact and reflect the beliefs and expectations of the Company's management. The words "anticipates”, "believes”, "estimates”, "expects”, "forecasts”, "plans”, "predicts”, "projects”, "targets" and similar words are intended to identify these statements, which necessarily involve known and unknown risks and uncertainties foreseen, or not, by the Company. Therefore, the Company’s future operating results may differ from current expectations and readers of this release should not base their assumptions exclusively on the information given herein. Forward-looking statements only reflect opinions on the date on which they are made and the Company is not obliged to update them in light of new information or future developments.

ATTACHMENTS

Attachment 1: Operational Indicators

The Complete Financial Statements, including Explanatory Notes, are available at the Company’s Investor Relations Website: www.tim.com.br/ir.

Attachment 1

TIM PARTICIPAÇÕES S.A.

Operational Indicators

http://ri.tim.com.br/Default.aspx?linguagem=en

(A free translation of the original in Portuguese)

TIM Participações S.A. and

TIM Participações S.A. and Subsidiaries

Notes to quarterly information

At September 30, 2014

(In thousands of Reais, unless otherwise indicated)

45

1. Operations

TIM Participações S.A. (“TIM Participações” or “Company” or “Group”) is a publicly-held

corporation based in the city of Rio de Janeiro and is a subsidiary of TIM Brasil Serviços e

Participações S.A. (“TIM Brasil”). TIM Brasil is a subsidiary of the Telecom Italia Group and

holds 66.61% as of September 30, 2014 (66.68% as of December 31, 2013) of the capital of

TIM Participações. The Company’s main purpose is to control companies providing

telecommunications services, including personal mobile telephones in their areas of concession

and/or licenses. The services provided by TIM Participações’ subsidiaries are regulated by the

Agência Nacional de Telecomunicações (“Anatel”).

The Company’s shares are traded on the BM&F/Bovespa. Additionally, TIM Participações

trades its Level II American Depositary Receipts (ADRs) on the New York Stock Exchange.

Accordingly, the Company is subject to the rules of the Brazilian Securities Commission

(Comissão de Valores Mobiliários or “CVM”) and the U.S. Securities and Exchange

Commission (“SEC”). In accordance with good market practice, TIM Participações adopts the

practice of simultaneously releasing its financial information in Reais in both markets, in

Portuguese and English.

Direct subsidiaries

(a) TIM Celular S.A. (“TIM Celular”)

The Company holds 100% of TIM Celular. This subsidiary provides Landline Telephone

Services (“STFC”) - Domestic Long Distance and International Long Distance voice services;

Personal Mobile Service (“SMP”); and Multimedia Communication Service (“SCM”) in all

Brazilian states and in the Federal District.

(b) Intelig Telecomunicações Ltda. (“Intelig”)

The Company also holds 100% of Intelig’s shares. This company provides STFC in local mode

and SCM services in all Brazilian states and in the Federal District (DF).

2. Licenses for the use of radio frequencies

Licenses to use radio frequencies for SMP services are for a fixed period and in most cases may

be renewed for a further 15 years. Licenses held by the subsidiary TIM Celular as of September

30, 2014, as well as their expiration dates, are shown in the table below. The cost of extension

of the right of use is included in the Instrument of Licenses for Radiofrequencies and consists of

biannual payment to the Granting Authority of the amount equal to 2% of the net revenues

recorded in the year that ends each biannual period. The payment considers only the net

revenues directly related to the regions covered by each renewed license. As of September 30,

2014, the Company had accounts payable related to the licenses renewal of R$104,161.







46

Maturity Date

Concession areas

450 MHz

800MHz,

900 MHz and

1,800 MHz

Additional

frequencies

1800 MHz

1900 MHz and

2100 MHz

(3G)

2500 MHz

(Band V1 -

4G)

2500 MHz

(Band P** -

4G)

Amapá, Roraima, Pará,

Amazonas and Maranhão

- Mar. 2016 Apr. 2023 Apr. 2023 Oct. 2027 AM - Sept.

2014****

PA - Feb.

2024***

Rio de Janeiro and Espírito Santo Oct. 2027 Mar. 2016 ES - Apr. 2023 Apr. 2023 Oct. 2027 RJ - Feb.

2024***

Acre, Rondônia, Mato Grosso,

Mato Grosso do Sul, Tocantins,

Distrito Federal, Goiás, Rio

Grande do Sul (except

municipality of Pelotas and

region) and municipalities of

Londrina and Tamarana in Paraná

PR - Oct.

2027

Mar. 2016 Apr. 2023 Apr. 2023 Oct. 2027 DF - Feb.

2024***

São Paulo - Mar. 2016 Countryside -

Apr. 2023

Apr. 2023 Oct. 2027 -

Paraná (except municipalities of

Londrina and Tamarana)

Oct. 2027 Sept. 2022* Apr. 2023 Apr. 2023 Oct. 2027 Feb. 2024***

Santa Catarina Oct. 2027 Sept. 2023* Apr. 2023 Apr. 2023 Oct. 2027 -

Municipality and region of

Pelotas in Rio Grande do Sul

- Apr. 2024* - Apr. 2023 Oct. 2027 -

Pernambuco - May, 2024* - Apr. 2023 Oct. 2027 -

Ceará - Nov. 2023* - Apr. 2023 Oct. 2027 -

Paraíba - Dec. 2023* - Apr. 2023 Oct. 2027 -

Rio Grande do Norte - Dec. 2023* - Apr. 2023 Oct. 2027 -

Alagoas - Dec. 2023* - Apr. 2023 Oct. 2027 -

Piauí - Mar. 2024* - Apr. 2023 Oct. 2027 -

Minas Gerais (except

municipalities of the PGO sector

3 for 3G radio frequencies and

others)

- Apr. 2028* Apr. 2023 Apr. 2023 Oct. 2027 Feb. 2015

Bahia and Sergipe - Aug. 2027* - Apr. 2023 Oct. 2027 -

São Paulo (AR 11) – Secondary

Use

- Sept. 2015 - - - -

*Agreements already renewed for fifteen (15) years; therefore, they are not entitled to a new renewal period.

** It does not include the entire State, only certain areas of it.

*** There is no Agreement renewal, as the band is currently in use. License acquired for the remaining years only.

**** On September 23, 2014 TIM submitted a Request for Abdication from P Band in ANF 92.

Regarding licenses held for provision of services for the 4th Generation of SMP (“4G”), on

October 16, 2012, TIM Celular, together with the other winning bidders, signed the aforesaid

Instrument of Authorization. The subsidiary paid the equivalent of 10% of the amount attributed

to the Concession Instrument in the 4G Auction, disbursing R$36,478. The remaining 90% was

settled on May 29, 2013, and although the levying of monetary correction on this last

installment, amounting to R$24,586 and which to date has not been provided, due to a favorable

opinion from the Office of the Federal Attorney General (Opinion n. 4814/2013), there is still

no final decision from the Agency.

Also on October 16, 2012, Intelig was authorized to use the 450MHz radio frequency, so as to

meet the rural telephone commitments arising from – the 4G Auction.







47

The terms of the STFC and SCM Licenses held by TIM Participações’ subsidiaries are

undetermined.

Through Act No. 4312, of March 31, 2014, Anatel granted to TIM Celular the right to use sub-

bands of radio frequency from 912.5 MHz to 915 MHz and from 957.5 MHz to 960 MHz, on a

secondary basis, for eighteen (18) months, restricted to the Provision Area corresponding to

AR11 (Greater São Paulo), amounting to R$2,538.

On September 30, 2014 TIM Celular took part in the 700 MHz band auction for the

implementation of 4th Generation mobile telephony using LTE technology, and was awarded

Lot 2 (10 MHz + 10 MHz) for 15 years, renewable for a similar period, in the amount of

R$1,947 million. The months ahead will see the implementation of the procedures required for

adjudicating the winning bidders, payment and execution of the Instruments of Authorization.

The auction also included the obligation of reimbursement for handing back the bands occupied

by radio transmission, to be shared among the winning bidders, with the company having to pay

R$1,199 million. There were no impacts on this third quarter. The impact will only happen after

the grant of licenses by Anatel.

3. Basis for preparation and submission of quarterly information

The significant accounting policies applied to the preparation of this quarterly information are

described below. These policies were consistently applied in the periods presented, unless

otherwise indicated.

a. General preparation and disclosure criteria

The quarterly information was prepared taking into account the historical cost as the base value

for financial assets and liabilities (including derivative instruments) evaluated at fair value.

The quarterly consolidated financial statements were prepared in accordance with CPC 21 / IAS

34 – “Interim Financial Statements”. Without divergences in the application of CPC 21 / IAS

34, the Company adopts accounting practices based on the Brazilian Corporate Law and

Specific Rules issued by CVM and Anatel.

The quarterly individual financial statements were prepared in accordance with CPC 21 and

shown in conjunction with the quarterly consolidated financial statements. Investments in the

subsidiaries are accounted for based on the equity method of accounting. The same adjustments

also apply to the quarterly individual and consolidated financial statements so as to arrive at the

same result and shareholders’ equity attributable to the shareholders of the parent company,

TIM Brasil. The Brazilian accounting practices applicable to the quarterly individual financial

statements differ from the IFRS applicable to the quarterly separate financial statements. The

difference lies only in the measurement of investments using the equity method while, in

accordance with the IFRS, this evaluation would be at cost or fair value.

Assets and liabilities are reported according to their degree of liquidity and liability. They are

reported as current when they are likely to be realized or settled over the next twelve months.

Otherwise, they are recorded as non-current. The only exception to this procedure involves

deferred income tax and social contribution balances, both assets and liabilities, which must







48

always be recorded as non-current, in accordance with the provisions of pronouncement IAS 1

(CPC 26).

The preparation of quarterly information requires the use of certain critical accounting estimates

and the exercise of judgment by the Company’s Management in the process of applying the

Group’s accounting policies. Those areas requiring a greater level of judgment and with greater

complexity, as well as the areas in which assumptions and estimates are material for the

quarterly consolidated and individual financial statements, are described in Note 5.

The individual and consolidated interim financial reporting should be read with the annual

consolidated financial statements of the year ended December 31, 2013.

b. Comparability of quarterly information

b.1 Reclassification for better disclosure

In the cash flows statement, the effects of yields on financial investments were reclassified from

“operational activities” to “investment activities”, as it is yields on cash and cash equivalents.

Statements of cash flows: Consolidated

Period of nine months ended September 30, 2013

Original b.1 Reclassified

Operating activities

Income before income tax (IR) and social

contribution (CSLL) 1,460,959 -

1,460,959

Adjustments to reconcile income to net cash

from operating activities:

Depreciation and amortization 2,044,811 - 2,044,811

Residual value of property, plant and equipment and

intangible assets written-off 9,526 -

9,526

Monetary adjustment of the provision for asset

retirement obligations 4,256 -

4,256

Provision for administrative and legal proceedings 215,420 - 215,420 Monetary adjustment of judicial deposits and

administrative and legal proceedings 45,305 -

45,305

Interest, monetary and exchange variations on

borrowings and financings, other financial

adjustments and leasing 307,703 -

307,703

Monetary adjustment of dividends 7,564 - 7,564

Interest on financial investments (162,626) 162,626 -

Allowance for doubtful accounts 195,884 - 195,884 Stock options 2,387 - 2,387

4,131,189 162,626 4,293,815

Decrease (increase) in operating assets

Trade accounts receivable (373,584) - (373,584)

Taxes and contributions recoverable (261,644) - (261,644)

Inventories (127,004) - (127,004)

Prepaid expenses (194,187) - (194,187)

Escrow deposits 150,917 - 150,917

Other assets (69,571) - (69,571)

Increase (decrease) in operating liabilities

Labor obligations 78,848 - 78,848

Suppliers (135,885) - (135,885)

Taxes, fees and contributions (630,540) - (630,540)

Authorizations payable (299,144) - (299,144)

Provision for administrative and legal proceedings (204,126) - (204,126) Other liabilities (54,049) - (54,049)

Net cash from operating activities 2,011,220 162,626 2,173,846







49

Investment activities

Financial assets valued at fair value through profit or

loss 158,024 (162,626)

(4,602)

Additions to property, plant and equipment and

intangible assets (2,516,328) -

(2,516,328)

Asset retirement obligations (2,364) - (2,364)

Net cash used in investment activities (2,360,668) (162,626) (2,523,294)

Financing activities

New borrowings 1,053,324 - 1,053,324

Repayment of borrowings (1,124,649) - (1,124,649)

Derivative transactions 62,163 - 62,163

Reimbursement to shareholders – combination o

shares TIM Fiber RJ S.A. (24) -

(24)

Dividends paid (735,809) - (735,809)

Net cash used in financing activities (744,995) - (744,995)

Decrease in cash and cash equivalents (1,094,443) - (1,094,443)

Cash and cash equivalents at the beginning of the year 4,429,780 - 4,429,780

Cash and cash equivalents at the end of the year 3,335,337 - 3,335,337

c. Approval of the quarterly information

This quarterly information was approved by the Board of Directors of the Company on

November 4, 2014.

4. Summary of significant accounting practices

The following accounting practices are adopted in preparing the parent company’s quarterly

information (BR GAAP) and for the consolidated accounts (BR GAAP and IFRS).

a. Functional currency and presentation currency

The presentation currency for the quarterly information is the Real (R$), which is also the

functional currency for all the companies consolidated in this quarterly information.

Transactions in foreign currency are recognized at the exchange rate on the date of the

transaction. Except for assets and liabilities recorded at fair value, monetary items in foreign

currency are converted into Reais at the exchange rate on the date of the balance sheet as

informed by the Central Bank of Brazil. Exchange gains and losses linked to these items are

recorded in the statements of income.

b. Consolidation procedures

Subsidiaries are all entities (including structured entities) in which the Group holds the control.

The Group controls an entity when it is exposed or has rights to variable returns from its

involvement with the investee and has the ability to affect those returns through its power over

the investee. Subsidiaries are fully consolidated from the date on which control is transferred to

the Group. The consolidation is interrupted from the date that the Group loses the control over

that entity.







50

The following companies are consolidated in the quarterly information:

Interest

Corporate Name Status 2014 2013

TIM Celular S.A. Direct subsidiary 100% 100%

Intelig Telecomunicações Ltda. Direct subsidiary 100% 100%

We use purchase accounting to record the acquisition of subsidiaries by the Group. The

acquisition cost is measured as the fair value of assets offered, equity instruments (e.g., shares)

issued and liabilities incurred or assumed by the acquirer at the date when control is exchanged.

Identifiable assets acquired, contingencies and liabilities assumed in a business combination are

initially measured at their fair value at the acquisition date, irrespective of the proportion of any

minority interest. The excess of acquisition cost over the fair value of the Group’s share of the

identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the

fair value of net assets of the subsidiary acquired, the difference is recognized directly in the

statement of income as a receipt.

Transactions between Group companies, as well as balances and unrealized gains and losses in

these transactions, are eliminated. Accounting policies of subsidiaries have been adjusted to

ensure consistency with the accounting policies adopted by TIM Participações. The base date of

the financial information used in the consolidation is the same for all Group companies.

c. Segment information

Operating segments are the entity’s components that develop business activities from which

revenues can be obtained and expenses incurred. Their operating results are regularly reviewed

by the entity’s chief operating decision maker, in order to make decisions on the allocation of

resources to each individual segment and to assess their performance. For an operating segment

to exist, it must have separate financial information available.

The Company’s chief operating decision maker, responsible for allocating resources and for

periodic performance evaluation, is the Executive Board. The Executive Board and the Board of

Directors are jointly responsible for making strategic decisions and for managing the Group.

The Group’s strategy is to maximize the consolidated results of TIM Participações. This

strategy includes optimizing the operations of each group company, in addition to taking

advantage of the synergies generated among them. Notwithstanding the various business

activities, the decision makers see the Group as a single business segment and do not take into

account specific strategies intended for a particular service line. All decisions on strategic,

financial, purchasing, investment and fund investment planning are made on a consolidated

basis. The aim is to maximize the consolidated result obtained by exploring the SMP, STFC and

SCM licenses.

d. Cash and cash equivalents

Cash and cash equivalents include cash, bank deposits and other short-term high liquidity

investments, with an insignificant risk of change in value. The withdrawals can be done at any

time without risk of losing the income earned and these amounts are used to pay short term

obligations of the Company.







51

e. Financial assets and liabilities

e.1 Financial assets

e.1.1 Classification

The Group classifies its financial assets in the following categories: (1) valued at fair value

through profit or loss and (2) loans and receivables. On all dates shown in this quarterly

information Management determines the classification of its financial assets at initial

recognition.

(a) Financial assets valued at fair value through profit or loss

A financial asset is classified in this category if it was acquired primarily for sale in the short

term. For this reason these assets are usually classified under current assets. However, where

these assets are given in guarantee, or other restrictions exist on their short-term use, they may

be classified as non-current assets.

The derivatives held by the Company have also been classified in this category, given their

nature. The Company does not have speculative derivatives and does not apply hedge

accounting.

(b) Loans and receivables

These are non-derivative financial assets with fixed or determinable payments, and are not

quoted in an active market. In the quarterly information they are classified as “accounts

receivable”, “cash and cash equivalents” and “other assets”.

e.1.2 Recognition and measurement

The regular purchases and sales of financial assets are recognized on the trade date - the date on

which the Company undertakes to buy or sell the asset. Investments are initially recognized at

fair value. The transaction costs incurred in acquiring investments valued at fair value through

profit or loss are charged to the income statement as expenses on the transaction date. After

initial recognition, changes in the fair value are booked in income for the year as financial

income and costs. Such assets are written off when the rights to receive cash flows from the

asset have expired or when the Company has transferred substantially all risks and benefits of

owning them.

The fair values of investments with publicly quoted prices are based on their purchase price at

each base date shown. If the market for a financial asset is not active, the Company establishes

fair value by using valuation techniques. These techniques include the analysis of recent

transactions with third parties, reference to other instruments that are substantially similar,

analysis of discounted cash flow models and option pricing models which make maximum use

of information generated by the market and minimum use of possible information generated by

Management.







52

e.1.3 Offsetting financial instruments

Financial assets and liabilities are reported at their net amount when there is a legal right and an

intention to offset them on a net basis, or to realize the asset and liquidate the liability

simultaneously.

e.1.4 Impairment of financial assets

At the end of each reporting period the Company evaluates whether there is objective evidence

of the impairment of its financial assets. An asset or group of financial assets is impaired and

losses are recognized only if there is objective evidence of impairment. Such evidence would be

the result of one or more events occurring after the initial recognition of the assets, and that loss

event (or events) would have an impact on the estimated future cash flows of the financial asset

(or group of financial assets) which can be reliably estimated.

The criteria which the Company uses to determine whether there is objective evidence of

impairment include verification as to real situations involving:

material financial difficulties of the issuer or borrower;

a breach of contract, such as default or late payment of interest or principal;

the Company, for economic or legal reasons relating to the financial difficulty of the

borrower, provides a concession to the latter that a lender would not normally consider;

it is likely that the borrower will declare bankruptcy or other financial reorganization

that generates losses for lenders;

the disappearance of an active market for that financial asset because of financial

difficulties; and

observable data indicating that there has been a measurable reduction in the estimated

future cash flows of a portfolio of financial assets, although the decrease cannot be identified by

individual analysis of the individual financial assets in the portfolio. These data include:

(i) adverse changes in the payment status of borrowers in the portfolio; and

(ii) national or local economic conditions that correlate with defaults on assets in the

portfolio.

The amount of the impairment loss is measured as the difference between the book value of the

assets and the new value (fair value less cost to sell / value in use) calculated after allowing for

any of the situations mentioned above. Where impairment losses are identified, they are

recognized directly in the profit or loss for the year. If, in a subsequent period, the value of the

impairment loss decreases and the decrease can be related objectively to an event occurring after

the impairment being recognized (such as, for example, an improvement in the borrower’s

credit worthiness), the reversal of the impairment loss is also recognized in the consolidated

statement of income for the year.







53

e.2 Financial liabilities

The main financial liabilities recognized by the Company and its subsidiaries are: supplier

accounts payable, unrealized losses on derivative transactions and borrowings and financing.

They are classified into the categories below according to the nature of the financial instruments

contracted:

Financial liabilities valued at fair value through profit or loss: At each balance sheet date, these

liabilities are measured at fair value. Interest, monetary correction, exchange rate variations and

variations arising from measurement at fair value, if any, are recognized in profit or loss as

incurred, in the lines of financial income or costs. On the dates presented in this quarterly

information, this category is composed basically of derivative financial instruments.

Financial liabilities measured at amortized cost: are basically non-derivative financial liabilities

that are not usually traded before maturity. At the initial recognition, such liabilities are

recorded at their fair value. After initial recognition, they are measured using the effective

interest method. Under this method, transaction costs impact the initial liability amount,

affecting the determination of the effective interest rate. This rate is the rate that exactly

discounts all the cash flows from the financial instrument. The appropriation of financial costs,

according to the effective interest rate method, is recognized in the income statement under

“financial costs”. On the dates of presentation of this quarterly information, this category

includes mainly borrowings and financing and accounts payable to suppliers of the Company.

f. Accounts receivable

Accounts receivable from users of telecommunications services, from network use

(interconnection) and from sales of handsets and accessories are recorded at the price charged at

the time of the transaction. The balances of accounts receivable also include services provided

and not billed until the balance sheet date. Accounts receivable from clients are initially

recognized at fair value and are subsequently measured at amortized cost using the effective

interest method less impairment for accounts receivables (“impairment”).

The allowance for doubtful accounts is recorded as a reduction in accounts receivable in an

amount deemed sufficient to cover possible losses on these receivables, based on the profile of

the subscriber portfolio, the period for which the accounts have been overdue, the economic

situation and the risks involved in each case.

g. Inventories

Inventories are stated at average acquisition cost. A provision is recognized to adjust the cost of

handsets and accessories to net realizable value (selling price) when this amount is less than the

average acquisition cost.

h. Indirect and direct taxes and contributions recoverable

These are stated at historical cost and, if applicable, adjusted according to the legislation in

force.







54

i. Prepaid expenses

These are initially stated at actual amounts disbursed and are appropriated to income according

to the accrual method as they are incurred.

j. Judicial deposits

These are stated at historical cost and adjusted according to the legislation in force.

k. Investments

Equity interests in subsidiaries are valued using the equity method only in the quarterly

individual financial statements.

l. Property, plant and equipment

Property, plant and equipment are stated at acquisition or construction cost, less accumulated

depreciation and the provision for impairment (the latter, only if applicable). Depreciation is

calculated on the straight-line method over terms that take into account the expected useful lives

of the assets and their residual value (Note 17). The Company recognizes its assets by individual

component.

The estimated costs of disassembling towers and equipment on rented properties are capitalized

and amortized over the useful life of these assets. The Company recognizes the present value of

these costs in property, plant and equipment with a counter-entry to the liability “provision for

future asset retirement”. Interest incurred on updating the provision is classified as financial

costs. The accounting for this obligation is made according to ICPC12 (IFRIC 1).

Gains and losses from disposals are determined by comparing the amounts of these disposals

with the carrying values at the time of the transaction and are recognized in “Other operating

expenses (revenues), net” in the income statement.

As the Group does not build assets requiring long periods of time for their completion, the

Company does not capitalize interest on borrowings and financing.

m. Intangible assets

Intangible assets are measured at historical cost less accumulated amortization and provision for

impairment (if applicable), and reflect: (i) the purchase of licenses and rights to use radio

frequency bands and (ii) software in use and/or development. Intangibles also include (i) the

purchase of the right to use the infrastructure of other companies, (ii) customer lists, and (iii)

goodwill on the purchase of companies.

Amortization charges are calculated on the straight-line method over the estimated useful life of

the assets contracted and over the terms of the authorizations. The useful life estimates of

intangible assets are reviewed regularly.







55

Goodwill

Goodwill is the positive difference between the amount paid or payable for an entity acquired

and its net assets on the date of acquisition. These assets are the difference between the net fair

value of assets and liabilities of the acquired entity. If the purchaser identifies negative goodwill

(a negative difference between the amount paid or payable for the entity acquired and its net

assets), this amount should be recorded as a gain in the income statement for the period, on the

date of acquisition.

The goodwill is not regularly amortized and must be tested annually to identify probable

impairment in its value. The accounting record of the goodwill is made at its cost less these

losses (if any).

For the purposes of impairment test, the goodwill is allocated to the Cash Generating Units

(CGUs). The allocation is made to the CGUs or groups of CGUs that benefit from the business

combination from which the goodwill arose.

Gains and losses arising from the disposal of an entity include the carrying amount of goodwill

relating to the entity sold.

Software

The costs associated with maintaining software are recognized as expenses as incurred.

Identifiable and unique development costs that are directly attributable to the design and testing

of software products, controlled by the Group, are recognized as intangible assets when the

following criteria are met:

it is technically feasible to complete the software to make it available for use.

Management plans to complete the software and use it or sell it.

the software will generate probable future economic benefits that can be demonstrated.

technical, financial and other resources are available to conclude development and use

or sell the software.

the expenditure attributable to the software during its development can be measured

reliably.

Directly attributable costs, which are capitalized as part of the software product, include costs

with employees directly allocated to its development.

Other development expenditures that do not meet these criteria are recognized as expense as

incurred.

As stated above, as the Group does not build assets requiring long periods of time for their

completion, the Company does not capitalize interest on borrowings and financing.







56

n. Impairment of non-financial assets

Goodwill is tested for impairment annually. For other assets, verification of impairment is made

whenever events or changes in circumstances indicate that the carrying value of the asset

exceeds its recoverable value. The latter is the higher between the fair value of an asset less

costs to sell and the value in use. For purposes of impairment assessment, assets are grouped at

the lowest levels for which there are separately identifiable cash flows (Cash Generating Units -

CGUs). The discount of expected cash flows is made by taking into account the time value of

money and the specific risks related to the asset being analyzed.

The impairment provisions (or part of them) on these assets, except goodwill, may be reversed

where it can be shown that the reasons (or part of them) that gave rise to the provisions no

longer exist on the quarterly information reporting date.

o. Provisions

Provisions are recognized in the balance sheet when the Company has a legal obligation or an

obligation resulting from a past event, and it is probable that an outflow of funds will be

required to settle it.

p. Accounts payable to suppliers

Accounts payable to suppliers are obligations to pay for goods or services that were purchased

in the normal course of business. They are initially recognized at fair value and subsequently

measured at amortized cost using the effective interest method. Given the short maturity term of

these obligations, in practical terms, they are usually recognized at invoice value.

q. Employee benefits

Profit sharing

The Company and its subsidiaries record a provision on a monthly basis for the estimated

amount of employee profit sharing, with a compensating entry to expense. The provision

calculation takes into account the targets disclosed to its employees and approved by the Board

of Directors.

Such amounts are recorded as personnel expenses and allocated to the income statement

accounts in accordance with the employee’s original cost center.

Pension plans and other post-employment benefits

The Company and its subsidiaries have defined contribution and defined benefit plans in place.

In general, defined benefit plans establish a specific retirement benefit amount that an employee

will receive upon retirement, usually dependent on one or more factors such as age, length of

service and remuneration.

The liability recognized in the balance sheet with respect to defined benefit pension plans is the

present value of the defined benefit liability at the balance sheet date, less the fair value of plan

assets, with adjustments for unrecognized past service costs, if any. The defined benefit







57

obligation is calculated annually by independent actuaries, using the projected unit credit

method. The present value of defined benefit obligations is determined by discounting estimated

future cash outflows, using interest rates consistent with market yields, which are denominated

in the currency in which benefits will be paid and which have maturities close to those of the

respective pension plan liability.

Past service costs are recognized immediately in income. Gains and losses arising from changes

in the actuarial assumptions are recorded in the shareholders’ equity, as other comprehensive

income, as incurred.

Regarding defined contribution plans, the Company makes contributions to public and private

pension insurance plans obligatorily, contractually or voluntarily. The defined contribution

plans carry no additional obligation for the Company over and above the monthly contributions

mentioned, for as long as the employee is a member of staff of the Company or its subsidiaries.

If the employee leaves the Company and its subsidiaries within the period required to be entitled

to withdraw the contributions made by the sponsors, the amounts to which the employee is no

longer entitled, and which may represent a reduction in the future contributions by the Company

and its subsidiaries to active employees, are booked as assets.

Stock options

The Company operates share-based compensation plans, which are settled with shares, for

which the entity receives the services of certain employees in consideration for equity

instruments (options) granted. The Company calculates and records the effects of the stock

options in accordance with CPC 10 (R1) (IFRS 2). The fair value of employee services is

recognized as an expense, with a compensating entry to capital reserve, and is determined by

reference to the fair value of the options granted.

Social contributions payable in connection with the granting of share options are deemed an

integral part of the grant itself, and the payment is treated as a transaction settled in cash.

r. Income tax and social contribution

Income tax includes current and deferred income tax and social contribution, and transactions

are recognized in the income statement. There are no income tax and social contribution

amounts recognized in comprehensive income. Income and social contribution tax credit and

debit balances are stated at their net amount only when there is both a right and the intention to

offset them upon settlement.

Current balances

The current income tax and social contribution charges are calculated based on the tax laws

enacted or substantially enacted up to the balance sheet date. Management periodically reviews

the positions taken by the Company in its income tax returns with respect to tax regulations

subject to interpretation.

Brazilian tax legislation allows companies to opt for quarterly or monthly payments of income

tax and social contribution. The Company and its subsidiaries opted to pay income tax and

social contribution quarterly.







58

Deferred balances

Deferred income and social contribution taxes are recognized on (1) accumulated income tax

and social contribution losses and on (2) temporary differences arising from differences between

the tax bases of assets and liabilities and their carrying values in the quarterly information.

Deferred income tax is determined using enacted tax rates (and tax laws), or substantially

enacted, up to the balance sheet date. Subsequent changes in tax rates or tax legislation may

modify deferred tax credit and debit balances.

Deferred income and social contribution tax credits are recognized only in the event of a

profitable track record and/or when the annual forecast prepared by the Company, examined by

the Fiscal Council and approved by Management, indicates the likelihood of future realization

of those tax credits.

Deferred income and social contribution tax credits and debits are shown in the balance sheet at

the net amount, when both a legal right and the intention to offset them exist at the time when

current taxes are ascertained, usually in relation to the same legal entity and the same tax

authority. Thus deferred tax credits and debits in different entities are in general shown

separately, not at their net amount.

s. Provision for administrative and legal proceedings

This is set up at an amount deemed sufficient to cover losses and risks considered probable,

based on analysis by the Company’s internal and external legal consultants and by Management.

Situations where losses are considered possible are subject to disclosure considering their

historical values and those where losses are considered remote are not disclosed.

t. Leases

Leases where a significant portion of the risks and benefits is retained by the lessor are

classified as operating leases and their effects are recognized in the income statement for the

year over the lease period.

Leases in which the Company, as lessee, substantially holds the risks and benefits of ownership

are classified as financial leases, which are capitalized at the beginning of the lease at the lower

of the fair value of the leased item and the present value of the payments provided for in the

agreement. Interest related to the lease is recognized in the income statement over the

contractual term.

u. Shareholders’ equity

The principal items which affect the Company’s shareholders’ equity are subject to the

following accounting practices:







59

Capital

It is stated at the amount effectively raised from shareholders, net of the costs directly linked to

the issuance process.

When a Group company purchases the Company’s shares, aiming to hold them as treasury

shares, the amount paid, including any directly attributable additional costs, is deducted from

the Company’s shareholders’ equity, until the shares are cancelled or reissued. When these

shares are reissued subsequently, any amount received, net of additional costs directly

attributable to the transaction, is included in shareholders’ equity.

Reserves

These are constituted and utilized according to the Corporate Law and the Company’s By-laws.

Distribution of dividends

The distribution of minimum compulsory dividends, calculated pursuant to the By-laws, is

recognized as a liability at the end of each fiscal year. Any other amount to be distributed as

interim dividends or in payment of dividends exceeding the minimum compulsory amount, for

example, is provided for only on the date when the additional distribution is approved by the

shareholders in a General Meeting.

v. Revenue recognition

As a rule, revenues are only recognized to the extent that it is probable that the economic

benefits from the transactions will flow to the Company and that their values can be measured

reliably.

Revenues from services rendered

The principal service revenues are derived from monthly subscribers, the provision of separate

voice, SMS and data services, and user packages combining these services, roaming charges and

interconnection revenue. The balances are recognized as the services are used, net of sales tax

and discounts granted on services. These revenues are booked only when the amount of services

rendered can be estimated reliably.

Balances are recognized monthly via invoicing, and billable revenues between the billing date

and the end of the month (unbilled) are identified, processed and recognized in the month in

which the service was rendered. Calculations of unbilled balances from the previous month are

reversed out, and unbilled items are calculated again at each current month.

Interconnection traffic and roaming revenues are recorded separately, without offsetting the

amounts owed to other telecom operators. (the latter are booked as operating costs).

The minutes not used by customers in the prepaid service system are recorded as deferred

revenues and allocated to income when these services are actually used by customers.







60

Revenues from product sales

Revenues from product sales (telephones, mini-modems, tablets and other equipment) are

recognized when the significant risks and benefits of the ownership of such products are

transferred to the buyer.

w. New standards, changes and interpretations of standards not yet in force

The following new standards were issued by the IASB, but they are not in force for the year

2014. The early adoption of these standards, although encouraged by IASB, was not allowed in

Brazil by the CPC.

IFRS 9 - “Financial Instruments” deals with the classification, measurement and

recognition of financial assets and liabilities. IFRS 9 was issued in November 2009 and October

2010 and replaces the parts of IAS 39 relating to the classification and measurement of financial

instruments. IFRS 9 requires the classification of financial assets in two categories: those

measured at fair value and those measured at amortized cost. The determination is made at the

initial recognition. The classification basis depends on the entity’s business model and on the

contractual characteristics of the financial instruments’ cash flow. Regarding financial

liabilities, the standard maintains the majority of the requirements set forth in IAS 39. The main

change is that, in cases where the fair value option is adopted for financial liabilities, the portion

of the change in fair value which is due to the entity’s own credit risk is recorded in other

comprehensive income, not in the income statement, except when this would result in an

accounting mismatch. The Group is assessing the overall impact of IFRS 9, which comes into

force on January 1, 2018.

IFRS 15 – This converging standard, which resulted from the joint efforts of IASB

(International Accounting Standards Board) and FASB (Financial Accounting Standards

Board), will enhance revenue reporting and the comparability of financial statements

worldwide. Companies reporting according to the IFRS are required to use the new revenue

standard as from January 1, 2017, being subject to approval by the EU. The Group is assessing

the overall impact of IFRS 15 in its financial statements.

There are no other IFRS rules or IFRIC interpretations, which are not yet in force, that could

have a significant impact on the Group.

5 Critical judgment in the application of accounting policies

Accounting estimates and judgments are continuously evaluated. They are based on our

historical experience and factors such as expectations of future events considering the

circumstances as of the base date of the quarterly information.

By definition, the accounting estimates resulting from such assumptions rarely equal the actual

outcome. The estimates and assumptions, including significant risk and probable material

adjustments in the book values of assets and liabilities for the next fiscal year, are shown below:

(a) Loss on impairment of non-financial assets







61

Losses from impairment take place when the book value of assets or cash generation units

exceeds the respective recoverable value, which is considered as the fair value less selling costs,

or the value in use, whichever is greater. The calculation of the fair value less selling costs is

based on the information available from sale transactions involving similar assets or market

prices, less the additional costs incurred to dispose of such assets. The value in use is based on

the discounted cash flow model. Cash flows derive from the Company’s business plan for a

period equivalent to the useful life of the asset being analyzed. Any reorganization activities to

which the Company has not committed itself on the base date on which the quarterly

information are reported or any material future investments aimed at improving the asset base of

the cash generation unit being tested are excluded for the purposes of the impairment test.

The recoverable value is sensitive to the discount rates used in the discounted cash flow method,

as well as with expected cash receivables and the growth rate of revenue and expenses used for

extrapolation purposes. Adverse economic conditions may lead to significant changes in these

premises.

As at December 31, 2013 and 2012, the main non-financial assets for which this assessment was

made are the property, plant and equipment and intangible assets of Intelig and the goodwill in

the Company and its subsidiaries (see notes 17 and 18). During the first half of 2014, there was

no evidence found that could significantly change the results of the assessment made at the end

of the last year. As required by accounting standard CPC 01, a new impairment test will be

conducted by the Company during the year 2014 (planned for the last quarter of the year).

(b) Asset retirement obligation (see note 27)

The estimated costs of dismantling towers and equipment on rented property are capitalized and

amortized over the useful life of these assets. The Company uses estimates to recognize the

present value of these costs and their amortization period. These estimates involve projected

dismantling costs, the average duration of the lease agreements and the discount rate to

determine their present value. This estimate is susceptible to a variety of economic conditions

that may not in fact arise when the assets are actually dismantled.

(c) Income tax and social contribution (current and deferred)

Income tax and social contribution (current and deferred) are calculated in accordance with

prudent interpretations of the legislation currently in force. This process normally includes

complex estimates in order to define the taxable income and temporary differences that are

deductible or taxable. In particular, deferred tax assets on income tax and social contribution

losses, and temporary differences are recognized to the extent that it is probable that future

taxable income will be available to be offset by them. The recoverability of the deferred income

tax on tax and social contribution losses and temporary differences takes into account estimates

of future taxable income and is based on conservative tax assumptions (see note 12).







62

(d) Allowance for doubtful accounts

The impairment of accounts receivable is shown as a reduction from accounts receivable and is

recorded based on the customer portfolio profile, the aging of past due accounts, the economic

scenario and the risks involved in each case. The allowance is considered sufficient to cover any

losses on receivables (see note 8).

(e) Provision for administrative and legal proceedings

Contingencies are analyzed by the Company’s management and (internal and external) legal

advisors. The Company’s reviews take into account factors such as the hierarchy of laws, case

law available, recent court decisions and their relevance in the legal order. Such reviews involve

management’s judgment (see note 26).

(f) Fair value of derivatives and other financial instruments (see note 41)

The Company has applied the change in IFRS 7 for financial instruments measured at the fair

value in the balance sheet, which requires the disclosure of measurements in accordance with

the following hierarchy:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: Inputs, other than quoted prices quoted that are observable for the asset or

liability, either directly (for example, as prices) or indirectly (for example, derived from prices);

and

Level 3: Inputs for the asset or liability that are not based on observable market data.

(g) Unbilled revenues

Considering that some billing cut-off dates occur at intermediate dates within the months, at the

end of each month there are revenues to be recognized which are not effectively billed to the

customers. These unbilled revenues are recorded based on estimates which take into account

historical data of usage, number of days since the last billing date, among other factors.

6 Cash and cash equivalents

Parent company Consolidated

09/2014 12/2013 09/2014 12/2013

Cash and banks (124) (75) 56,454 106,176

Financial investments:

CDB/Repurchases with a due date within 90 days 45,155 19,187 5,371,416 5.181,466

45,031 19,112 5,427,870 5,287,642

Bank Deposit Certificates (“CDB”) and Repurchases are nominative securities issued by banks

and sold to the public as a means of raising funds. Such securities can be traded during the

contracted period, at any time, without significantly loss of value.







63

The calculation of the annual average return of the Company’s investments, including those not

classified as cash and cash equivalents, is 101.13% of the Interbank Deposit Certificate - CDI

rate.

7 Financial assets at fair value through profit or loss


09/2014 12/2013 09/2014 12/2013

CDB/Repurchases 86 89 41,886 28,681

Non-current portion 86 89 41,886 28,681

The total investments classified as non-current are restricted for use by virtue of legal actions.

8 Accounts receivable Consolidated

09/2014 12/2013

Billed services 990,738 1,015,111

Unbilled services 627,276 675,634

Network use 506,542 670,592

Sale of goods 1,721,968 1,538,664

Other accounts receivable 2,804 2,912

3,849,328 3,902,913

Allowance for doubtful accounts (387,619) (353,925)

3,461,709 3,548,988

Current portion (3,429,189) (3,513,029)

Non-current portion 32,520 35,959

The fair value of accounts receivable equals the book value shown on September 30, 2014, and

December 31, 2013. The total amount of BNDES borrowings is guaranteed by accounts

receivable (see Note 21).

Variation in the allowance for doubtful accounts is as follows:

Consolidated

09/2014 12/2013

(9 months) (12 months)

Initial balance 353,925 347,176

Provision recorded 211,326 240,051

Provision written-off (177,632) (233,302)

Final balance 387,619 353,925







64

The aging of the accounts receivable is as follows: Consolidated

09/2014 12/2013

Falling due 3,031,152 2,904,269

Past due for up to 30 days 171,432 182,543



Past due for more than 90 days 485,938 478,727

3,849,328 3,902,913

9 Inventories Consolidated

09/2014 12/2013

Cellular phone sets and tablets 275,698 267,305

Accessories and pre-paid cards 20,743 13,031

TIM chips 26,918 32,033

323,359 312,369

Provision for adjustment to realizable amount (16,740) (15,540)

306,619 296,829

The change in provision for adjustment to the realizable amount was as follows:

Consolidated

09/2014 12/2013


Opening balance 15,540 11,655

Provision recorded 117,577 190,044

Provision written-off (116,377) (186,159)

Closing balance 16,740 15,540







65

10 Indirect taxes and contributions recoverable Consolidated

09/2014 12/2013

ICMS 1,720,308 1,437,991

Others 11,379 11,981

1,731,687 1,449,972

Current portion (1,221,198) (913,215)


The ICMS credits refer primarily to the amounts to be offset regarding acquisitions of property,

plant and equipment and inventories of the subsidiaries.

11 Direct taxes and contributions recoverable


09/2014 12/2013 09/2014 12/2013

Income tax and social contribution 1,538 3,486 66,817 27,637

PIS/Cofins 20,185 20,185 332,264 326,921

Others 238 1,447 43,535 38,605

21,961 25,118 442,616 393,163

Current portion (21,961) (25,118) (386,047) (370,626)

Non-current portion - - 56,569 22,537

The PIS/Cofins amounts recoverable refer primarily to credits involving the purchase of handset

inventories.

12 Deferred income tax and social contribution

Deferred income tax and social contribution are calculated using the prevailing rates for each

tax. During fiscal years 2014 and 2013, the prevailing rates were 25% for income tax and 9%

for social contribution. They also take into account the tax incentives shown in Note 37.

The amounts shown in the accounts are as follows:

Parent Company Consolidated

09/2014 12/2013 09/2014 12/2013

Deferred taxes – Liabilities

Business combination - Intelig - - (130,146) (131,325)

Amortized goodwill – TIM Fibers - - (185,247) (137,612)

Derivative financial instruments - - (102,663) (68,833)

- - (418,056) (337,770)







66

Deferred taxes – Assets

Tax losses 20,798 13,956 1,215,215 1,320,017

Social contribution losses 7,552 5,088 451,200 488,929

Temporary differences

Allowance for doubtful accounts - - 134,052 117,131 Provision for administrative and

legal proceedings 1,215 1,038 143,118 126,444 Adjustment to present value - 3G

license -

- 17,377 18,834

Deferred tax on CPC adjustments 53,569 53,569 170,511 166,511

Effect of merger of TIM Fibers - - 982 1,110

Profit sharing - - 34,170 18,394

Taxes with suspended enforceability - - 12,872 12,872

Others 349 138 (3,333) (2,554)

83,483 73,789 2,176,164 2.267.688 Provision for devaluation of tax assets

(Intelig and TIM Part) (83,483)

(73,789) (1,227,421) (1,202,967)

- - 948,743 1,064,721

TIM Celular

TIM Celular has set up deferred income tax and social contribution assets on its total tax losses,

social contribution losses and temporary differences, on the basis of projected future taxable

earnings.

Based on these projections, the subsidiary expects to recover the credits as follows:

2014 249,159

2015 185,203

2016 253,614

2017 174,903

2018 onwards 85,864

948,743

The estimates for recovery of tax assets were calculated taking into account the financial and

business assumptions available at the close of 2013. The time table for the recovery of such

credits was approved by the Company’s Board of Directors and reviewed by the Audit

Committee. It is not necessary to discount the credits to their present values and accordingly no

discount rates were applied on this analysis. As mentioned in Note 5, due to the uncertainties

inherent in making estimates, these projections may not be confirmed in the future.

Subsidiary TIM Celular used credits related to tax losses carried forward and negative basis of

social contribution in the amount of R$159,366 in the nine-month period ended September 30

2014.

Intelig

Based on estimates of future taxable income and taking into account its history of tax losses and

social contribution losses, Intelig believes that it currently does not meet the minimum requisites

for recording deferred income tax and social contribution. Thus the company has maintained the







67

provisions for the whole of these tax assets. At September 30, 2014, the total amount provided

was R$1,143,938 (R$1,129,178 at December 31, 2013), of which R$1,012,033 refers to income

tax losses and social contribution losses, while R$10,905 refers to temporary differences.

Intelig’s liabilities show deferred income tax and social contribution amounting to R$130,146

(R$131,325 at December 31, 2013), from the adoption of deemed cost at the first adoption of

IFRS.

TIM Participações S.A.

As it is a holding company, TIM Participações has no activities which could normally be offset

by income tax losses, social contribution losses and temporary differences. At September 30,

2014 the provision for losses on these deferred tax assets amounted to R$83,483 (R$73,789 at

December 31, 2013).

13 Prepaid expenses Consolidated

09/2014 12/2013

Fistel (*) 250,043 -

Rentals and insurance 49,414 64,429

Advertising not released 67,286 157,467

Network swap (**) 48,602 55,159

Others 21,888 26,205

437,233 303,260

Current portion (361,906) (206,354)


(*) The Fistel fee, paid in March 2014, refers to the year 2014 and has been amortized monthly in

accordance with the respective generating factor.

(**) On April 1, 2010, the subsidiary Intelig and the GVT entered into a reciprocal agreement of

assignment of fiber optic infrastructure (network swap), in order to expand their respective fields of

operation. Given the economic nature of the transaction, the amount was recognized in the (current and

non-current) prepaid expenses account against a corresponding entry to other (current and non-current)

liabilities (Note 25). At September 30, 2014, the current balances were R$8,792 (R$8,792 at December

31, 2013) and the long-term balances were R$39,810 (R$46,367 at December 31, 2013). Both amounts

are being appropriated to income in the same proportion over a period of 10 years.

14 Escrow deposits Parent company Consolidated

09/2014 12/2013 09/2014 12/2013

Civil 10,494 7,814 383,013 233,248

Labor 50,735 41,400 329,293 272,262

Tax 1,265 1,321 232,646 214,645

Regulatory - - 106 106

62,494 50,535 945,058 720,261







68

15 Other assets Parent company Consolidated

09/2014 12/2013 09/2014 12/2013

Advances to suppliers 211 - 173,357 89,609

Advance to employees 81 2 19,687 2,569

Fiscal incentives - - 6,554 6,554

Other rights 12,538 10,260 48,532 55,632

12,830 10,262 248,130 154,364

Current portion (12,830) (10,262) (234,626) (141,140)


16 Investments - Parent company

(a) Interest in subsidiaries

09/2014

TIM Celular Intelig Total

Number of shares held 38,254,833,561 3,279,157,266

Interest in total capital 100% 100%

Shareholders’ equity 14,021,298 1,001,607

Unrealized earnings - (2,166)

Adjusted shareholders’ equity 14,021,298 999,441

Net income (loss) for the period 1,160,114 (46,115)

Unrealized earnings - 606

Adjusted net income (loss) for the period 1,160,114 (45,509) 1,114,605

Equity in results of subsidiary 1,160,114 (45,509) 1,114,605

Investment amount 14,021,298 999,441 15,020,739







69

12/2013

TIM Celular Intelig Total

Number of shares held 38,254,833,561 3,279,157,266

Interest in total capital 100% 100%

Shareholders’ equity 13,340, 411 1,047,619

Unrealized earnings (2,772)

Adjusted shareholders’ equity 13,340,411 1,044,847

Net income (loss) for the period 1,639,202 (118,678)

Unrealized earnings 807

Adjusted net income (loss) for the period 1,639,202 (117,871) 1,521,331

Equity in results of subsidiary 1,639,202 (117,871) 1,521,331

Investment amount 13,340,411 1,044,847 14,385,258

Changes in investment in subsidiaries TIM Celular Intelig Total

Balance of investments at December 31, 2013 13,340,411 1,044,847 14,385,258

Equity in results of subsidiaries 1,160,114 (45,509) 1.114,605

Supplementary dividends (482,486) - (482,486)

Stock options 3,259 103 3,362

Balance of investments at September 30, 2014 14,021,298 999,441 15,020,739

17 Property, Plant and Equipment

(a) Movement in property, plant and equipment

Balance

at 12/2013

Additions

Write-offs

Transfers

Balance

at 09/2014

Cost of property, plant and

equipment, gross

Commutation / transmission

equipment 13,664,289

1,314

(709)

1.104,774

14,769,668

Fiber optic cables 498,325 - - 10,443 508,768

Loaned handsets 1,700,582 - (7,912) 76,270 1,768,940

Infrastructure 3,915,669 - (107) 290,541 4,206,103

Informatics assets 1,413,894 - (40,472) 75,345 1,448,767

General use assets 577,702 - (3,313) 26,626 601,015

Land 40,505 - - - 40,505

Construction in progress 716,151 1,418,297 (54) (1,583,999) 550,395

Total property, plant and

equipment, gross 22,527,117

1,419,611

(52,567)

-

23,894,161







70

Accumulated depreciation

Commutation/transmission

equipment (9,067,571)

(782,571)

825

(108)

(9,849,425)

Fiber optic cables (127,033) (26,034) - - (153,067)

Loaned handsets (1,559,511) (89,055) 2,050 106 (1,646,410)

Infrastructure (2,004,384) (237,830) 107 (2) (2,242,109)

Informatics assets (1,199,207) (56,552) 40,471 2 (1,215,286)

General use assets (362,169) (35,012) 3,311 2 (393,868)

Total accumulated

depreciation (14,319,875)

(1,227,054)

46,764

-

(15,500,165)

Property, plant and

equipment, net

Commutation / transmission

equipment 4,596,718

(781,257)

116

1,104,666

4,920,243

Fiber optic cables 371,292 (26,034) - 10,443 355,701

Loaned handsets 141,071 (89,055) (5,862) 76,376 122,530

Infrastructure 1,911,285 (237,830) - 290,539 1,963,994

Informatics assets 214,687 (56,552) (1) 75,347 233,481

General use assets 215,533 (35,012) (2) 26,628 207,147

Land 40,505 - - - 40,505

Construction in progress 716,151 1,418,297 (54) (1,583,999) 550,395

Total property, plant and

equipment, net 8,207,242

192,557

(5,803)

-

8,393,996

Depreciation rates Average annual rate %

Commutation / transmission equipment 8 to 14.29

Fiber optic cables 4 to 10

Loaned handsets 50

Infrastructure 4 to 10

Informatics assets 20

General use assets 4 to 10

In 2013, pursuant to CPC 27, the Company and its subsidiaries assessed the useful life estimates

for their property, plant and equipment, concluding that there was no significant change or

alteration to the circumstances on which the estimates had been based that would justify

changes to the useful lives currently in use. To determine the useful life of the assets, the

Company considers not just the type of the asset, but also the way it is used and the conditions

to which the assets is submitted during its operations.







71

18 Intangible assets

The amounts of the SMP licenses and radio frequency licenses, as well as software, goodwill

and other items, were recorded as follows:

(a) Movement in intangible assets

Balance

at 12/2013

Additions

Write-offs

Transfers

Balance

at 09/2014

Cost of intangible assets, gross

Software rights 10,172,666 - - 926,083 11,098,749

Concession licenses 4,968,081 46,369 - 10,800 5,025,250

Assets and facilities in progress 30,963 1,141,603 - (1,017,313) 155,253

Goodwill 1,527,219 - - - 1,527,219

List of clients 95,200 - - - 95,200 Right to use infrastructure LT Amazonas

380,473

3,287

-

(185,558)

198,202

Other assets 79,464 - - 80,430 159,894

Intangible assets, gross 17,254,066 1,191,259 - (185,558) 18,259,767

Accumulated amortization

Software rights (7,478,596) (735,829) - - (8,214,425)

Concession licenses (3,269,536) (262,237) - - (3,531,773)

List of clients (36,400) (12,600) - - (49,000)

Right to use infrastructure LT Amazonas (6,053) (4,271) - - (10,324)

Other assets (27,300) (8,023) - - (35,323)

Total accumulated amortization (10,817,885)

(1,022,960)

-

-

(11,840,845)

Intangible assets, net

Software rights 2,694,070 (735,829) - 926,083 2,884,324

Concession licenses 1,698,545 (215,868) - 10,800 1,493,477

Assets and facilities in progress 30,963 1,141,603 - (1,017,313) 155,253

Goodwill 1,527,219 - - - 1,527,219

List of clients 58,800 (12,600) - - 46,200

Right to use infrastructure LT Amazonas 374,420 (984) - (185,558) 187,878

Other assets 52,164 (8,023) - 80,430 124,571

Intangible assets, net 6,436,181

168,299

-

(185,558)

6,418,922

The transfers of the period includes R$185,558 represented by the amounts of the infrastructure

sharing agreement entered into with Telefónica for assets involved in the LT Amazonas project.

This value has been transferred from the Intangible assets to “Leasing” as a result.

(b) Amortization rates

Average annual

rate - %

Software rights 20

Concession licenses 5 to 50

Customer list 17.65

Other assets 20







72

(c) Goodwill from previous years

(c.1) Intelig´s acquisition

During the year ended December 31, 2009, as a result of having valued at fair value the

identifiable assets acquired and the liabilities assumed from Intelig on the acquisition date, the

fair value of net assets acquired amounted to R$529,714. Thus the amount paid for acquiring

Intelig, R$739,729 at December 30, 2009, was R$210,015 higher than the fair value of the net

assets acquired. This surplus amount was allocated as goodwill and is represented by/based on

the Company’s expected future earnings. As required for all goodwill, its recoverability is tested

annually through an impairment test.

At December 31, 2013, the Company used the value in use method to perform the impairment

test, using the following assumptions:

Intelig’s network is fundamental for the Group’s business development, allowing and

supporting the development of the current and new service offers as well as creating a

significant leased lines’ cost reduction. To determine the cost savings related to the leased lines,

the Company used the market prices of circuit rents, taking into consideration also their

locations. The present value of these rents were deducted from the net value of Intelig’s

permanent assets at December 31, 2013;

the projection of Intelig’s network maintenance and operation costs was based on the

Company’s expected inflation rate (5.6%) which is consistent with the projections prepared by

market institutions;

the term used for the impairment test was 11 years, consistent with the average useful

life of Intelig’s network assets; and

the discount rate applied over the projected cash flows was 12.56% p.a.

As a result of the test, there was no evidence of impairment to be recorded.

(c.2) Goodwill arising from TIM Fiber SP and TIM Fiber RJ acquisitions

TIM Celular acquired, at the end of 2011, Eletropaulo Telecomunicações Ltda. (which,

subsequently, had its trade name changed to TIM Fiber SP Ltda. – “TIM Fiber SP”) and AES

Communications Rio de Janeiro SA (which, subsequently, had its trade name changed to TIM

Fiber RJ S.A. – “TIM Fiber RJ”). These companies were SCM providers in the main

municipalities of the Greater São Paulo and Greater Rio de Janeiro areas, respectively. The

objective of these acquisitions was to allow the Company to expand its operations in high-speed

data communications, enabling Grupo TIM Brasil to offer new products to its customers and to

reduce the cost of rental of infrastructure, as well as achieve other important synergies related to

the fiber optic network.

TIM Fiber SP Ltda. and TIM Fiber RJ. S.A. were merged into TIM Celular S.A. on August 29,

2012.

The subsidiary TIM Celular recorded the goodwill allocation related to the acquisition of the







73

companies TIM Fiber SP and TIM Fiber RJ, at the end of the process of purchase price

allocation, at the amount of R$1,159,648. One of the items that supports the goodwill related to

these transactions is the future profitability of the operation from residential broadband

business. The impairment test considered this CGU the value in use methodology. The

following assumptions were made:

growth percentages in the client basis, aligned with the Company’s business plans;

increase in service revenues due to the combination of in speed performance and the

option voice x IP;

projections of operation and maintenance costs considering the growth in client basis,

eventual scale gains and inflation effects. The Company’s expected inflation rate for the

operating expenditures of Fiber (5.26% p.a.) is aligned with the projections prepared by the

main market institutions;

considering that the business has an indefinite life, as from the 11th year, it was

estimated a perpetuity with a nominal growth in cash flows of 3% p.a.; and

the discount rate for the future cash flows was 13.03% p.a.

It is important to emphasize that the network synergies from the TIM Fibers (leased line

savings, like at Intelig) also support the future profitability regarding the goodwill from the

acquisition of these companies. Bearing in mind that the cash flows relating to residential

broadband are already sufficient to support the goodwill registered, the Company did not extend

its impairment test to calculate the value in use of the network synergies. Should the need arise,

these synergies can also be taken into account in the annual impairment tests.

The result of these impairment tests performed in December 31, 2013 showed no evidence of

the need to provide for losses.

(c.3) Acquisition of minority interests in TIM Sul and TIM Nordeste

In 2005, the Company acquired all the shares of the minority shareholders of TIM Sul and TIM

Nordeste Telecomunicações, in exchange for shares issued by TIM Participações, converting

these companies to full subsidiaries. At that time, the transaction was recorded at the book value

of those shares in the financial statements, with no goodwill being recorded for the difference in

market value between the shares traded. For the purposes of the initial adoption of IFRS in

2010, the Company opted to apply the exemption permitted under IFRS 1, recording goodwill

of R$157,556, which was ascertained when the financial statements according to IFRS were

prepared for the Company’s parent company in 2005.

The Company´s combined estimates (that includes landline and mobile telephone services,

broadband business, leased lines, etc) adjusted to the present value, indicate that there is no need

for impairment. The assumptions used for these estimates were detailed above.







74

(d) List of clients

As part of the purchase price allocation process involving the acquisitions of TIM Fiber SP

Ltda. and TIM Fiber RJ S.A., contractual rights were identified for the companies acquired to

provide future services. These contractual rights were evaluated at their fair value on the date

the companies were acquired, and are being amortized in accordance with their estimated useful

life on the same date.

(e) Right to use of infrastructure - LT Amazonas

Subsidiary TIM Celular executed agreements for the right to use infrastructure with companies

that operate transmission lines in Northern Brazil. Such agreements fall within the scope of

IFRIC 4 and are classified as financial leases.

Additionally TIM Celular entered into network infrastructure sharing contracts with Telefónica

Brasil S.A. also in the Northern region. In these contracts, both operators optimize resources and

reduce its operational costs.

19 Leasing

Leasing - Liabilities

Subsidiary TIM Celular executed agreements for the right to use infrastructure with companies

that operate transmission lines in Northern Brazil. The terms of these agreements are for 20

years, counted as from the date the assets are ready to operate. The contracts provide for

monthly payments to the electric power transmission companies, annually restated by IPC-A.

The consolidated nominal amount due by TIM Celular is R$675,353. Its present value is

R$329,532, and was estimated on the date the agreements were signed with the broadcaster by

projecting future payments at an inflation rate of 5.22% and discounting these at 14.44%.

The table below presents the future payments schedule for the agreements in force related to LT

Amazonas Project. These amounts represent the estimated disbursements under the agreements

executed with the distributors and are shown at their par values. It is important to stress that

these balances differ from those shown in the books since, in the case of the latter, the amounts

are shown at present value:

Nominal amounts

Until September 2015 40,741

From October 2015 until September 2019 139,453

From October 2019 onwards 495,159

675,353

The present value of installments due is R$313,001 for principal and R$16,531 for interest

accrued until September 30, 2014. Additionally, the amount of the right of use of LT Amazonas

also considers R$70,759 related to investments in property, plant and equipment made by TIM

Celular and subsequently donated to the electric power transmission companies. These

donations are already included in the contract signed by the parties.







75

Leasing – Assets

Subsidiary TIM Celular entered into network infrastructure sharing agreements with Telefónica

Brasil S.A.. In these agreements, TIM Celular and Telefónica Brasil S.A. share investments in

the Northern region of Brazil. The subsidiary has receivables against Telefónica Brasil S.A. that

has to be pay on a monthly basis for a 20 years period. These values are annually restated by

IPC-A. The consolidated par value of future installments receivable by TIM Celular is

R$355,101. Their present value is R$193,850, as estimated on the date of execution of the

agreements entered into with the transmission companies. Future cash receipts were calculated

based on an inflation rate of 5.22%, discounted at 12.56%.

The table below includes the schedule of cash receipts of the agreement entered into with

Telefónica Brasil S.A. regarding the LT Amazonas Project. The amounts represent the cash

receipts provided for in the agreements entered into with Vivo, being registered at their par

value. It must be mentioned that these balances differ from those recorded in the accounting

books, where amounts are recorded at present value:

Nominal

amounts

Until September 2015 19,884

From October 2015 to September 2019 73,419

From October 2019 onwards 261,798

355,101

The present value of installments receivable is R$185,558 for principal and R$8,292 for interest

accrued until September 30, 2014.

20 Suppliers Parent Company Consolidated

09/2014 12/2013 09/2014 12/2013

Local currency

Suppliers of materials and services 1,667 1,491 3,851,756 4,753,061

Interconnection (a) - - 214,968 326,502

Roaming (b) - - - 1,354 1,658

Co-billing (c) - - 64,718 61,713

1,667 1,491 4,132,796 5,142,934

Foreign currency

Suppliers of materials and services 577 296 107,293 94,716

Interconnection (a) - - - -

Roaming (b) - - - 22,547 17,687

577 296 129,840 112,403

Current portion 2,244 1,787 4,262,636 5,255,337







76

(a) This refers to the use of the networks of other landline and mobile telephone operators, with calls

being initiated from TIM’s network and ending in the network of other operators.

(b) This refers to calls made by customers outside their registration area, who are therefore

considered visitors in the other network.

(c) This refers to calls made by a customer who chooses another long-distance operator.

21 Borrowings and financing Consolidated

Maturity

Description Currency Charges date Collateral 09/2014 12/2013

BNDES URTJLP TJLP to TJLP + 3.62% p.a.

Jul/22 Secured by TIM Part. and receivables from

TIM Celular

2,614,178 1,934,997

BNDES UMIPCA UMIPCA + 2.62%

p.a.

Jul/17 Secured by TIM Part.

and receivables from

TIM Celular

89,181 116,298

BNDES UM143 SELIC + 2,52% Jul/22 Secured by TIM Part.

and receivables from TIM Celular

888,646 -

BNDES (PSI) R$ 2.50% to 4.50% p.a. Jan/21 Secured by TIM Part. and receivables from

TIM Celular

399,983 334,889

BNB R$ 10.00% p.a. Jan/16 Bank surety and

guarantee of TIM

Part.

14,724 23,012

Banco do Brasil

(CCB)

R$ 106.50% of CDI Sept/15 492,076 481,447

Banco BNP Paribas USD Libor 6M + 2.53% p.a. Dec/17 Security by TIM Part. 206,914 224,395 Banco Europeu de

Investimento (BEI)

USD Libor 6M + 0.57% to

1,32%p.a.

Feb/20 Bank surety and

security by TIM Part. 1,164,848 1,115,324

Bank of America

(Res. 4131)

USD Libor 3M + 1.35% p.a. Sept/16 293,777 280,822

JP Morgan (Res. 4131)

USD 1.73% p.a. Sept/15 122,597 117,704

Cisco Capital USD 1.80% p.a. Sept/18 98,114 117,768

Total 6,385,038 4,746,656

Current (1,248,490) (966,658)

Non-current 5,136,548 3,779,998

The parent company TIM Participações does not have loans or financing at September 30, 2014.

The foreign currency loan taken out with Banco BNP Paribas and the financing obtained by

TIM Celular from the BNDES, are intended to expand the mobile telephone network, and they

have restrictive clauses that require compliance with certain financial ratios that are calculated

on a half-yearly basis. The subsidiary TIM Celular has been complying with all the required

financial ratios.

In April 2013, Intelig Telecomunicações made the first drawdown with the BNDES, amounting

to R$90 million, of which i) R$80 million at a cost of TJLP + 3.32% and ii) R$10 million at a

cost of 2.5% p.a. (PSI, or Investment Support Program).







77

In May 2013, TIM Celular made a drawdown with the BNDES, amounting to R$200 million

and a cost of TJLP + 3.32%.

In June 2013, Intelig Telecomunicações made a drawdown with the BNDES, amounting to

R$40 million, for a total term of 7 years, of which i) R$35.5 million at a cost of TJLP + 3.32%

and ii) R$4.5 million at a cost of 2.5% p.a. (PSI).

In December 2013, TIM Celular made a drawdown with the BNDES, amounting to R$82

million, for a total term of 7 years, of which i) R$58 million at a cost of TJLP + 3.32%; ii) R$15

million at a cost of 2.5% p.a. (PSI) and iii) R$9 million at a cost of TJLP.

In January 2014, TIM Celular made a drawdown with the BNDES, with respect to the credit

facility signed in December 2012, amounting to R$122 million, for a total term of 7 years, of

which i) R$92.6 million at a cost of TJLP + 3.32%; ii) R$16 million at a cost of 2.5% p.a. (PSI)

and iii) R$13.4 million at a cost of TJLP.

In February 2014, TIM Celular made the final drawdown of this facility with the BNDES,

amounting to R$93 million, for a total term of 7 years at a cost of TJLP + 3.32%.

In December 2013, TIM Celular entered into a new financing agreement with the BNDES in the

total amount of R$5,700 million, which will be used to finance investments in network and

information technology in the years 2014, 2015 and 2016. The total amount contracted with the

BNDES is divided as follows: i) R$2,402 million at a cost of TJLP + 2.52% and a total term of

8 years; ii) 2,636 million at a cost of SELIC + 2.52% and a total term of 8 years; iii) R$428

million at a cost of 3.50% p.a. and a total term of 7 years (regarding PSI line); iv) R$189 million

at a cost of TJLP + 1.42% and a total term of 8 years; and v) R$45 million at a cost of TJLP and

a total term of 8 years.

In April 2014, TIM Celular received the first release of this line in the amount of R$1,749

billion, of which i) R$770 million at a cost of TJLP + 2.52%; ii) R$845.5 at a cost of SELIC

rate + 2.52%; iii) 4.5 million at a cost of TJLP and; iv) 129 million at a fixed cost of 3.5% p.a.

(PSI).

The transactions related to the PSI credit lines qualify within the scope of IAS 20 – Accounting

for Government Grants and Disclosures of Government Assistance. Therefore, using the

effective interest method defined in IAS 39 - Financial Instruments, Recognition and

Measurement, the following observations were made: a comparison was made between (i) the

total debt amount calculated using the rates set forth in the agreement and (ii) the total debt

amount calculated using market rates (fair value). The balance at September 30, 2014,

corresponding to the adjustment of the subsidy granted by the BNDES for all the PSI lines is

approximately R$97 million. This amount was recorded in the “Other Liabilities” group of

accounts under “Government Subsidies” and deferred for the useful life of the asset being

financed and appropriated to the result of the “Other Subsidies Revenue” group of accounts.

In April 2014, TIM Celular entered into a credit agreement with Banco KFW in the amount of

USD 100 million. The funds will be released within 9 months. The credit facility will have a

total term of 5 years. In September 2014 TIM Celular requested full drawdown of the facility,

scheduling the entry of the proceeds for October 20, which coincided with the early closure of a







78

forward swap transaction in order to eliminate any exchange rate variance. The cost of this

transaction after factoring in the swap was 102.5% of the CDI rate.

In September 2014, the Company executed an amendment to the Bank Credit Certificate

existing with Banco do Brasil in the amount of R$150 million, extending the original maturity

in September 2014 to another year. The new maturity of the transaction is, therefore, September

2015. The cost of the transaction remained the same, that is 106,5% CDI.

The subsidiary TIM Celular has swap transactions to fully protect itself against any devaluation

of the Brazilian currency vis-à-vis the US Dollar. Nevertheless, this is not subject to “hedge

accounting”.

The long-term portions of loans and financing at September 30, 2014 mature as follows:

Consolidated

2015 151,924

2016 1,485,564

2017 816,527

2018 710,480

2019 onwards 1,972,053

5,136,548

Fair value of the loans

In Brazil there is no consolidated long-term debt market with the characteristics of the BNDES

and BNB facilities. In addition to the returns on long-term debt, the institutions take into

account the social benefits of each project for which financing is granted. For the purpose of our

analysis of fair value, given the absence of a similar market and the requirement that the

projects address governmental interests, the fair value of the loan is usually taken to be that

shown in the accounting records.

The PSI credit lines, obtained from BNDES, refer to specific programs of this institution and

has interest rates lower than those used in the ordinary BNDES operations. As mentioned, these

credit lines qualify for IAS 20. The BNDES credit lines are recorded at their fair value at the

withdrawal date and the fair value is calculated considering the CDI rate at the withdrawal date.

If the fair value was calculated in September 30, 2014, the PSI credit lines would have an

amount lower than that presented in the quarterly information in R$9 million.

A further transaction with extremely specific features is the loan from BNP. This is secured by

SACE, an Italian insurance company which also operates as a development institution. Given

the features of the transaction, we believe that its fair value is equal to that shown on the

Company’s balance sheet.

Regarding the funds raised with Bank of America, Cisco Capital, JP Morgan and Banco do

Brasil, current market conditions do not indicate the existence of any factor that might lead to a

different fair value for these transactions to that shown in the accounting records.

After applying the evaluation criterion that takes into account the characteristics of similar

transactions, the Company identified differences between the fair and book values of the funds







79

raised from the European Investment Bank (EIB). The fair value of the transaction is

approximately R$2 million less than the accounting balance.

22 Labor obligations


09/2014 12/2013 09/2014 12/2013

Social securities 241 130 52,922 39,812

Salaries and provisions payable 1,368 537 200,934 117,529

Employees’ withholding 157 119 7,604 13,215

1,766 786 261,460 170,556

23 Indirect taxes, fees and contributions payable


09/2014 12/2013 09/2014 12/2013

ICMS - - 432,921 475,430

ANATEL taxes and fees - - 26,091 44,141

ISS 35 49 35,591 43,145

Others 10 10 5,622 17,995

45 59 500,225 580,711

Current portion (45) (59) (500,133) (580,625)

Non-current portion - - 92 86

24 Direct taxes, fees and contributions payable


09/2014 12/2013 09/2014 12/2013

Income tax and social contribution - 2,738 255,351 213,153

PIS/COFINS - - 66,982 122,093

Others (*) 2,466 20 54,255 6,525

2,466 2,758 376,588 341,771

Current portion (2,466) (2,758) (150,545) (115,103)


(*) Refers basically to subsidiary TIM Celular join to REFIS since 2009, a federal fiscal

program that permits the Companies to pay the due debts on federal taxes (PIS, Cofins, IR and

CSL) in installments. On December 31, 2013, these amounts were recorded in PIS, Cofins, IR

and CSL accounts.







80

25 Other liabilities


09/2014 12/2013 09/2014 12/2013

Pre-paid services to be provided (1) - - 447,015 394,089

Reverse split of shares (2) and (5) 23,265 23,267 24,134 24,156

Government subsidies (3) - - 96,963 66,770

Advanced revenues (6) - - 35,020 40,464

Network swap (4) - - 48,602 55,159

Other liabilities 14,031 14,011 17,001 15,933

37,296 37,278 668,735 596,571

Current portion (7,531) (7,511) (492,123) (431,754)

Non-current portion 29,765 29,767 176,612 164,817

(1) This refers to minutes not used by customers involving pay-as-you-go system services,

which are appropriated to income when customers actually avail themselves of these services.

(2) On May 30, 2007, the Extraordinary Shareholders’ Meeting of the Company approved

the combination of all the shares issued by the Company in the proportion of 1,000 existing

shares for each 1 new share of the related type. From June 1, 2007 to July 2, 2007, shareholders

adjusted their equity holding in batches with multiples of 1,000 shares, per type, through private

negotiation, on the OTC market or on the São Paulo Stock Exchange (BOVESPA), at their free

and sole discretion. Therefore recognition of the liability in the amount of R$23,265

corresponds to the amount payable to the shareholders arising from holdings of less than 1,000

shares.

On September 18, 2007, an auction was held on the São Paulo Stock Exchange -

BOVESPA for the sale of 2,285,736 shares (1,185,651 common shares under the ticket TCSL3

and 1,100,085 preferred shares under the ticket TCSL4), representing the fractions resulting

from this grouping. The amounts obtained from the sale are at the disposal of the shareholders

of these fractions at any time.

(3) Refers to the release of funds be released under the credit facility from the BNDES

Investment Sustainment Program (BNDES PSI), whereby up to September 2014, the amount

disbursed totaled R$602,500 (R$457,500 on December 31, 2013). This transaction is classified

within the scope of IAS 20 Accounting for Government Grants and Disclosures of Government

Assistance. The sum total of the subsidies granted by the BNDES to date was R$130,688. This

amount is being amortized according to the useful life of the asset being financed and

appropriated to the “Other (expenses) revenues, net” group (Note 34).

(4) Refers mainly to the transfer of onerous contracts and reciprocal infrastructure of fiber

optics (note 13).

(5) On July 18, 2012, at an Extraordinary Shareholders’ Meeting, TIM Fiber RJ’s (entity

merged into TIM Celular) shareholders approved a reverse split of the shares of this subsidiary

converting each lot of 50,000 common shares into 1 common share. As a result, TIM Celular

became the 100% shareholder of TIM Fiber RJ.







81

The fractions of shares arising from the reverse split were canceled. Their related amounts are

available for reimbursement to the previous shareholders according to their respective share in

the capital of TIM Fiber RJ at the time of the reverse split. The right to reimbursement is

effective up to three years after the publication of the minutes of the shareholders’ meeting that

approved the reverse split. At September 30, 2014 this amount totaled R$869.

(6) Refers to the payment of the subscription bonus related to the agreement entered into

between the Company and Itaú Bank.

26 Provision for administrative and legal proceedings

The Company and its subsidiaries are parties to administrative and legal proceedings (civil,

labor, tax and regulatory) which arise in the normal course of their business. Provisions are set

up whenever Management, based on the opinion of its legal advisors, concludes that there is a

probable risk of loss.

The provision set up for administrative and legal proceedings is made up as follows:


09/2014 12/2013 09/2014 12/2013

Civil (a) - 111,326 88,385

Labor (b) 3,072 3,054 58,550 57,081

Tax (c) - - 206,637 171,025

Regulatory (d) 500 - 44,604 55,584

3,572 3,054 421,117 372,075

The changes in the provision for administrative and legal proceedings can be summarized as

follows:

12/2013

Additions, net of

reversals

Payments

Monetary

adjustment 09/2014

Civil (a) 88,385 164,945 (148,582) 6,578 111,326

Labor (b) 57,081 3,104 (1,942) 307 58,550

Tax (c) 171,025 18,850 (1,290) 18,052 206,637

Regulatory (d) 55,584 4,691 (16,218) 547 44,604

372,075 191,590 (168,032) 25,484 421,117

(a) Civil Proceedings

The Company and its subsidiaries are subject to various legal and administrative proceedings

filed against them by consumers, suppliers, service providers and consumer protection agencies,

in connection with a number of issues that arise in the regular course of business of the entities.

Management analyzes each legal or administrative proceeding with the aim of reaching a

conclusion in relation to any particular contingency, classifying it as representing a probable,

possible or remote risk. This assessment made by management is based upon the opinion of







82

lawyers who are hired to deal with such cases. Such assessment is regularly reviewed, and can

be changed over the course of the proceedings, in light of new facts or events, such as changes

in case law. Below, we present the main law suits for which a provision has been recorded:

a.1. Consumer lawsuits

The subsidiaries are parties to 16,843 lawsuits (15,799 at December 31, 2013), which refer to

claims that have been filed by consumers at the judicial and administrative levels. The

aforementioned lawsuits relate to questions regarding the relationship between the subsidiaries

and their clients, amounting to R$63,645. Especially, for TIM Celular, alleged wrong

collections, contract cancellation, service quality, deficiencies and failures in equipment

delivery, and unjustified inclusion in credit report services. In regard to the subject matters

underlying the cases against Intelig, worthy of note are questionings regarding improper

charging and unjustified inclusion in bad debtors' lists.

a.2. Class actions

There are 13 main class actions against subsidiaries where the risk of loss is regarded as being

probable:

(i) a lawsuit against TIM Celular filed by the Public Prosecutor’s Office in the State of Rio

de Janeiro, involving the impossibility of charging a contract termination penalty in the case of

theft of handsets;

(ii) a lawsuit filed against TIM Celular by the Public Prosecutor's Office of the State of

Minas Gerais challenging the practice of tied sales of phone sets and pre-paid or post-paid chips.

This lawsuit claims the payment of collective damages

(iii) a lawsuit filed against TIM Celular by the Public Prosecutor's Office of the State of

Minas Gerais to confirm whether usage is properly charged in invoices to customers.

(iv) a lawsuit filed against TIM Celular by the Public Prosecutor's Office of the State of São

Paulo questioning the quality of customer services.

(v) a lawsuit filed against TIM Celular by the Public Prosecutor's Office of the State of São

Paulo questioning the quality of the signal in the urban area of the municipality of

Cordeirópolis.

(vi) a lawsuit filed against TIM Celular by the Public Prosecutor's Office of the State of

Ceará to investigate alleged difficulties regarding termination of agreements. This lawsuit

claims payment of collective damages;

(vii) a lawsuit filed against TIM Celular by the Public Prosecutor's Office of the State of Rio

Grande do Norte aiming at investigating TIM's advertising campaign. TIM was sentenced to

pay collective damages;

(viii) a lawsuit filed against TIM Celular by the Public Prosecutor's Office of the State of Rio

Grande do Norte aiming at investigating the amounts charged from pre-paid clients regarding

the provision of "Mailbox" and "Follow Me" services;







83

(ix) a lawsuit filed against TIM Celular by the Public Prosecutor's Office of the State of Rio

Grande do Norte, questioning the quality of the network in the municipality of Upanema;

(x) a lawsuit filed against TIM Celular by the Public Prosecutor's Office of the State of

Paraíba, to investigate a report of alleged misleading advertising.

(xi) a lawsuit filed against TIM Celular by the Public Defendant of the State of Pará,

questioning the quality of the signal in the urban area of Paragominas.

(xii) a lawsuit filed against TIM Celular by the Consumer Defense Association (ADECON) of

Pernambuco, in relation to the placement of a guarantee seal on cell phones.

(xiii) a lawsuit filed against Intelig by the Public Prosecutor’s Office of the State of

Pernambuco, questioning failure to comply with Anatel Resolution 85, Article 61 (retroactive

collections).

Due to the fact that these lawsuits entail positive and negative obligations and, taking into

account the impossibility of accurately quantifying probable future disbursements at the current

stage of the legal proceedings, no provisions have been set up by Management regarding the

above described contingencies, except for those involving collective moral damages.

a.3. Suit filed by Botafogo Comércio e Importação Ltda.

Refers to a suit filed against former Telpe Celular S/A (actual TIM Celular S/A), in 2002, by a

former commercial partner, that alleged that TIM has not complied with the contract entered

into and practiced unfair competition, which makes it unfeasible to the partner to remain in

business. This year, the settlement of the judicial decision was begun, already judged, that

sentenced TIM to the payment of related damages, loss of profit and moral damages. The

calculation presented by TIM, prepared by a specialist, amounts to R$6,307. The case is still in

the settlement phase. Also, in mid-February 2014 TIM obtained a favorable verdict offered as a

result of an appeal in which the TJPE accepted the arguments of TIM that given the complexity

of the suit and the amounts involved, it would be necessary to undertake the settlement article

by article, and declared null and void the settlement procedure and the expert testimony to date.

Pari passu TIM filed an Action for Annulment in early August 2014 with a view to annulling

the sentence handed down in the (ordinary and original) Action for Compensation issued by the

Judge of the 15th Civil Court of the Jurisdiction of Recife/PE, supplemented by the agreement of

the 5th Civil Chamber of the TJPE, with the unappealable decision having being handed down

on August 07, 2012. During the annulment TIM contested the compensation parameters

established in the ruling that was annulled, which were a clear and literal violation of the legal

provisions applicable to the situation. There is a request for interlocutory relief so that

settlement phase of the sentence is suspended, which is still with the judge-rapporteur.

a.4. Collection suit filed by Mattos & Calumby Lisboa Advogados Associados

The law firm Mattos & Calumby Lisboa Advogados Associados filed a suit for collection of

fees of counsel against former TIM Maxitel (current TIM Celular S/A) with the 29th Lower

Civil Court of the Judicial District of Rio de Janeiro. The Plaintiff claims to be the creditor of

amounts arising from the agreement entered into with TIM (Legal Professional Services







84

Agreement). The claim was ruled to be valid and the case is currently in the enforcement phase.

The updated chances of loss, deemed probable, amount to R$3,808. Enforcement is within the

scope of the Superior Court of Justice, after a decision favorable to TIM issued by the Court of

Appeals of Rio de Janeiro.

a.5. Collection suit filed by TVM Comércio e Representações Ltda.

TIM is a defendant in the collection lawsuit filed by TVM Comércio e Representações Ltda.

(TVM) against TIM Celular and against DM5 Comércio e Representação Ltda. (DM5) in the

historical amount of R$4,019, in which TVM seeks an award against TIM and DM5, jointly and

severally, for payment of the adjusted cost of the acquisition by DM5 from TVM of business

outlets which, subsequently, were transferred to TIM Celular S/A. TVM argues that a

conveyance of the business outlets to TIM took place and, therefore, that TIM should be

responsible for paying the debt of DM5. On February 15, 2013, the lawsuit was judged in the

first instance, and TIM and DM5 were jointly and severally condemned to pay the amount of

R$4,019, plus interest and monetary adjustment since the filing of the lawsuit. On March 1,

2013, TIM filed an Appeal, which was partially accepted on November 28, 2013, to exclude

sentencing to payment of late payment fine, only. On December 16, 2013, TIM filed

Declaration Embargoes against the appellate decision, but on March 20, 2014, these were

denied. On May 8, 2014, TIM filed a Special Appeal against the appellate decision. The appeal

is pending processing.

a.6. Suit for declaratory judgment filed by the Magistrates Association of Paraná

(AMAPAR)

TIM is a defendant in a suit filed by the Magistrates Association of Paraná (AMAPAR)

demanding the annulment of three contracts executed between the parties due to breach of the

conditions previously agreed. In an initial decision the judge granted interlocutory relief and

imposed a daily fine. TIM submitted an interlocutory appeal against the decision. However, the

appeal was not upheld by the Appellate Court. In the sentence, the original claims were

considered valid. TIM filed an appeal which was partially upheld. In compliance with the

decision, the authors are executing the updated amount of R$3,925 referring to the sentence and

the amount imposed as a fine. TIM has appealed the decision and is awaiting judgment of the

appeal.

(b) Labor claims

These refer both to claims filed by former employees, in relation to matters such as salary

differences, wage parity, payments of variable compensation/commissions, additional legal

payments, overtime and other provisions that were established during the period prior to

privatization, as well as by former employees of service providers who, in accordance with the

labor legislation in force, have filed claims against the Company and/or its subsidiaries on the

grounds that they are responsible for labor related obligations that were not satisfied by the

service provider companies.

Out of the 16,896 labor claims at September 30, 2014 (13,577 at December 31, 2013) filed

against the Company and its subsidiaries, most of them relate to claims that involve former

employees of service providers. Part of the lawsuits relate to specific projects involving the

revision of service provider contracts, which in 2006 led to the termination of some of these

contracts, with the subsequent winding-up of these companies and the laying-off of employees.







85

Another significant portion of the contingencies that exist relates to the organizational

restructuring processes, especially the closure of the Client Relationship Centers (call centers) in

Fortaleza, Salvador and Belo Horizonte, which resulted in the termination of some 800 in-house

staff and outsourced personnel. At September 30, 2014, the provision for these cases amounts to

R$16,800 (R$19,371 at December 31, 2013).

(c) Tax proceedings

The Company and its subsidiaries have received tax assessments in which our external legal

counsel consider the risk of loss as probable. Briefly, these assessments refer to one-off

operational issues where some documentation requested has not yet been complied with in full

or where formal procedures have not been strictly observed.

In the case of federal taxes, a provision for TIM Celular has been made for three specific tax

cases referring to CIDE, CPMF and CSLL that totaled R$25,059. From these cases, the main

amount relates to the case in which TIM intends to have the right not to pay for the CPMF

allegedly due to simultaneous purchase and sale transactions of foreign currency, the updated

amount provided for is R$21,599.

Regarding several state lawsuits, the total updated amount provisioned is R$83,358.

Regarding municipal taxes, the amount provisioned is R$801.

Tax contingencies arising from the acquisition of Intelig, accrued in its PPA process, amounts to

R$97,418.

(d) Regulatory proceedings

Due to an alleged failure to comply with some of the provisions set out in the RSMP (Personal

Mobile Service Regulations), the STFC (Switched Landline Telephone Service Regulations)

and the quality targets defined under the General Quality Targets Plan (PGMQ) for SMP

(PGMQ-SMP) and STFC (PGMQ-STFC), Anatel filed eight (8) Procedures for the

Determination of Non-Compliance of Obligations (PADOs), involving the subsidiaries as of

September 30, 2014. Furthermore, there is an Administrative Proceeding with the Brazilian

Anti-Trust Body (CADE) which has been provisioned.

The Company has exerted its best efforts and presented all arguments at all administrative

levels, to avoid sanctions to its subsidiaries. These arguments, which are mostly of a technical

and legal nature, may help significantly reduce the initial monetary sanction (fine) charged. The

provision made by the Company, in the amount of R$55,584, monetarily adjusted, reflects this

assessment.

Anatel has brought administrative proceedings against the subsidiaries for: (i) failure to meet

with certain quality service indicators; (ii) default on certain obligations assumed under the

Instruments of Authorization; and (iii) non-compliance with the regulations of SMP and STFC,

among others.

The Subsidiaries submitted to Anatel administrative defenses and filed administrative appeals







86

and requests for reconsideration (through the courts whenever necessary), explaining that the

non-compliance was due to several factors, most of them involuntary and not related to the

activities and actions performed by the companies.

(e) Administrative and legal proceedings involving possible losses

Civil, labor, tax and regulatory actions have been filed against the Company and its subsidiaries

involving risk of loss that is classified as possible by the Management and the Company's legal

advisors. No provisions have been set up for these administrative and legal proceedings, and no

materially adverse effects are expected on the quarterly financial statements as shown below:

Consolidated

09/2014 12/2013

Civil 795,213 592,638

Labor 491,901 427,788

Tax 8,607,387 7,787,119

Regulatory 74,708 73,614

9,969,209 8,881,159

The administrative and legal proceedings assessed as possible losses are monitored by the

Management and disclosed on its historical values.

The main actions where the risk of loss is classified as possible are described below:

e.1. Civil

e.1.1. Consumer actions

The subsidiaries are parties to 80,782 lawsuits (77,316 at December, 31, 2013), that refer to

claims that have been filed by consumers at the judicial and administrative levels. The

aforementioned lawsuits relate to questions regarding the relationship between the subsidiaries

and their clients, amounting to R$346,527.

e.1.2. Class actions

There are several class actions against subsidiaries where the risk of loss is regarded as being

possible. They are summarized as follows: (i) a lawsuit against TIM Celular in the State of Rio

Grande do Norte (Natal) questioning the quality of the services provided and the network in that

State, as well as the quality of services provided in Florândia, Upanema and Jucurutu; (ii) a

lawsuit against TIM Celular in the State of Pará, challenging the quality of the service provided

by the network in the state and the municipalities of São Felix do Xingu, Parauapebas, Marabá,

Xinguara, Portel, Novo Progresso and Itaituba; (iii) lawsuits against TIM Celular in the State of

Maranhão, challenging the quality of the service provided by the network in the following

municipalities: Balsas, Grajaú, Coelho Neto, Vitorino Freire, São Luis, Magalhães de Almeida,

Governador Eugênio Barros, Carolina, Buriti, São Raimundo das Mangabeiras, Paraibano,

Governador Nunes Freire, Santo Antonio dos Lopes, Santa Luzia, Igarapé Grande, Pedreiras,

Olho D'Água das Cunhas, Presidente Dutra, Vargem Grande and Nina Rodrigues, Santa Inês,







87

Colinas, Codó and Carutapera, in addition to a Public Civil Suit questioning the quality of the

service in the entire State of Maranhão; (iv) lawsuits against TIM Celular in the State of Ceará,

challenging the quality of the services provided and the network in Fortaleza, Iguatu,

Monsenhor Tabosa, Ibiapina, Icapuí, Tauá and Icó; (v) lawsuits against TIM Celular in the State

of Piauí, challenging the quality of the services provided and the network in that state; (vi)

lawsuits against TIM Celular in the State of Rondônia, challenging the quality of the services

provided and of the network in the municipality of Machadinho do Oeste (Vale do Anari) and

Rolim de Moura; (vii) lawsuits against TIM Celular in the State of Amazonas, challenging the

quality of the services provided and of the network in that State, in Manaus, Tabatinga, Humaitá

and Tefé; (viii) lawsuits against TIM Celular in the State of Mato Grosso, challenging the

quality of the services provided and of the network in Novo São Joaquim, Campinópolis and

Nova Xavantina, Nova Maringá, Santo Antonio do Leverger and Juscimeira; (ix) a lawsuit filed

against TIM Celular in the State of Pernambuco, questioning the quality of the service provided

and the network in that state, in addition to lawsuits filed in the municipalities of Araripina,

Ouricuri, Exu and Petrolândia; (x) lawsuits filed against TIM Celular in the State of Alagoas,

questioning the quality of the services and the network in that State, especially in the

municipalities of Arapiraca, in addition to one Public Civil Suit questioning the quality of the

service in the entire State of Alagoas; (xi) a lawsuit filed against TIM Celular and other

operators in the State of São Paulo, questioning the service and network quality in Rio Claro

(Ajapi District) and Cordeirópolis, as well as a lawsuit filed against TIM Celular questioning the

quality of data services provided by TIM in São Paulo; (xii) a lawsuit filed against TIM Celular

in the State of Paraíba, questioning the quality of the services and the network in the

municipalities of Pombal and Monteiro; (xiii) a lawsuit filed against TIM Celular in the State of

Minas Gerais questioning the quality of the services and the network in that State and two

specific lawsuits questioning the quality of network in Uberlândia and another lawsuit in Juiz de

Fora; (xiv) a lawsuit filed against TIM Celular and other operators in the State of Rio Grande do

Sul requesting an expert investigation to verify the quality of service and network in such State;

(xv) a lawsuit filed against TIM Celular in the State of Santa Catarina questioning the quality of

service and network in such State and the existence of relationship sectors in certain locations,

in addition to the lawsuit filed to challenge the quality of services in the Municipality of

Ipumirim; (xvi) a lawsuit filed against TIM Celular in the State of Paraná, questioning the

quality of services provided and of the network in that state; (xvii) lawsuits filed against TIM

Celular, in the State of Tocantins, questioning the quality of services provided and of the

network in the municipalities of Itaguatins, Araguaína and Palmas; (xviii) three public civil

lawsuits questioning the quality of the service in the State of Rio de Janeiro; (xix) a lawsuit

against TIM Celular in the State of Espírito Santo questioning the quality of the service and the

network in Várzea Alegre, in addition to a public civil lawsuit filed by the Office of the Public

Defender of the State of Espírito Santo, questioning the quality of services in Baixo Guandu;

(xx) lawsuits against TIM Celular in the State of Bahia, questioning the quality of the service

and the network in Itiruçu, Gentio de Ouro, Licínio de Almeida, Ipupiara and Vitória da

Conquista; (xxi) lawsuit filed against TIM Celular by the Public Prosecutor's Office,

questioning the quality of the services in Distrito Federal, in addition to a public civil lawsuit

filed by a consumer defense entity questioning the quality of data services throughout the

Brazilian territory; (xxii) two lawsuits filed against TIM Celular in the State of Amapá,

challenging the quality of services provided and the State's network, as well as one public civil

lawsuit questioning the quality of services in the municipality of Oiapoque; (xxiii) a lawsuit

filed against TIM Celular in the State of Goiás, questioning the quality of the services rendered

and of the network in the State; and (xxiv) a lawsuit filed against TIM Celular questioning the

quality of the service in the municipality of Feijó, in the State of Acre.







88

Regarding class actions involving Intelig, the risk of loss of which is considered possible, the

following is worth being emphasized: (i) public civil suit filed by the State of Rio de Janeiro

involving advertising in the company's building; (ii) public civil suits involving the charging of

fees in bordering areas and filed by the Prosecution Office of the States of Paraná, Rio de

Janeiro and the Federal District; and (iii) public civil suits involving the charging of fees after

the regulated term provided for by ANATEL in Cascavel, Uberlândia, Fortaleza and São Paulo;

and (iv) a civil public action filed by the Public Prosecutor of the State of Minas Gerais,

questioning the alleged incorrect charging of users.

e.1.3. Other actions and proceedings

TIM is a defendant in the indemnity lawsuit filed by Secit Brasil Ltda, alleging that TIM is in

breach of contract. This company was hired by TIM to carry out infrastructure work on the

installation of ERBs in area 4 (Minas Gerais). TIM has already filed its defense and evidence

has been collected and is awaiting validation by the court. No lower level judgment has been

handed down. The amount allocated to this case is R$9,758.

TIM has filed a collection lawsuit against DM Link Representação Comercial Ltda., Davi

Marcelino Vieira, Marcos Marcelino Vieira and Monica Ferreira Odria Vieira, to have them

sentenced to pay R$3,511 plus monetary restatement and interest, and a lawsuit against DM5

Comércio e Representação Ltda., so that it is sentenced to pay R$5,004. DM5 and DM Link

were TIM sales outlets, but because of the companies' debts, the agreements were terminated. In

order to pay down the debt, DM5 offered stores in payment of the debt of DM Link, amounting

to R$5,861. DM5, in turn, filed a counterclaim, requesting that the transfer of the stores be

declared null and their return to DM5, that TIM be sentenced to pay the dividends it would have

received while the stores were in its possession and that if the return of the stores was

impossible, that TIM be sentenced to pay indemnification corresponding to the "market value"

of the stores, this value to be ascertained by expert investigation. A conciliation hearing has

been designated. The conciliation hearing was held on October 23, 2013, and was unsuccessful.

On February 13, 2014, a ruling was made approving the production of expert evidence and

notifying the Expert accordingly. No lower court decision has been handed down.

TIM is a defendant in the lawsuit brought by the company INTEGRAÇÃO Consultoria e

Serviços Telemáticos Ltda. (recharge distributor), with the 2nd

Lower Court of the Judicial

District of Florianópolis, State of Santa Catarina, for the sum of R$4,000 which aims to stay the

execution and, in the lawsuit, requests (i) indemnification corresponding to notice of termination

of 180 days for each reduction of the area operated in the agreement; (ii) indemnification for the

goodwill lost on account of the defendant having terminated the agreement; (iii) recognition of

the illegality of the goals system; (iv) declaration of the non-enforceability of the invoices due

in May 2008; (v) declaring of null and void the instrument of confession of debt; and (vi)

declaring of null and void the mortgages constituted on behalf of the defendant. Finally, the

injunction requests non-inclusion in lists of bad debtors. The injunction was granted by the

court. It should be stressed that TIM filed an execution action against the aforementioned

company with the 4th Lower Court of Florianópolis, for the sum of R$3,957. An appeal was

filed against execution, requesting effect of "supersedeas", by Integração Consultoria, which

was rejected by the judge. This lead to the filing of an interlocutory appeal, with the effect of

supersedeas having been granted. TIM has made a declaration to the effect that the assets listed

by the execution debtor are insufficient to secure the execution. The execution against TIM is







89

currently suspended due to the fact that an Interlocutory Appeal has been filed, whose staying

effect has been granted, and is pending judgment at the court: in other words, until otherwise

decided by the High Court there will be no order from the original court for a lien on assets in

the fixed amount execution action. No decision has yet been handed down regarding the

ordinary action.

TIM is a defendant in a declaratory lawsuit filed by CONSETREL Cadastros, Serviços e

Representações Ltda. with the 2nd

Civil Court of the Jurisdiction of Lavras, State of Minas

Gerais, requesting the amount of R$3,203. This company was a commercial partner of TIM and

alleges that the termination of the agreement was "unfair, unjustified and irregular", since "the

plaintiff was at no time in breach of contract." In addition to its defense, TIM also alleged

jurisdictional defense (so that the clause concerning the choice of jurisdiction contemplated in

the agreement was duly observed). This defense was not admitted, after which TIM filed an

interlocutory appeal. The Court granted this appeal. The case records were remitted to the

Judicial District of the Capital City of the State of Minas Gerais. TIM requested the production

of expert proof, which was approved. CONSETREL appealed the decision but the appeals were

rejected. The author filed an interlocutory appeal against the decision, while TIM submitted

counter arguments to the interlocutory appeal.No lower court decision has yet been handed

down.

In December 2010, TIM filed with the 15th Federal Court of the Federal District an action of

ordinary proceeding against ANATEL requesting interlocutory relief for the purpose of

acknowledgement and annulment of PADO N. 53500.025648/2005 and of Act N. 62.985/07.

The PADO applied by ANATEL prevented the company from participating in the public bid for

the "H" Band. Interlocutory relief was not granted by the judge, which enabled TIM to make a

court deposit of R$3,595 in order to suspend the debt and enable the company to participate in

the bidding process. The judge ruled for the suspension of the charge until a decision is reached.

TIM has already filed a reply and petition, submitting evidence that the court deposit has been

supplemented. The lawsuit was ruled partially valid, so as to annul default charges before the

date of maturity of the fine. TIM filed an Appeal, and ANATEL also appealed the unfavorable

decision rendered against it. Currently, the case records are pending judgment at the Federal

Regional Court of the 1st Region.

In October 2012, TIM filed for the annulment of the administrative proceeding against

ANATEL regarding the debt deriving from the 2% charge on interconnection revenues for

renewal of the right to use radiofrequencies associated with the provision of personal mobile

services in the State of Paraná (except for the municipalities of Londrina and Tamarana); the

State of Pernambuco; in the municipalities of Pelotas, Morro Redondo, Capão do Leão e

Turuçu, in the State of Rio Grande do Sul; and in the State of Piauí, in the amount of R$11,519.

Our request to suspend the payment of the debit was accepted against the presentation of a letter

of guarantee. The judge of the lower court ruled in favor of approval of the claim in full, and

declared the debt unenforceable. On July 25, 2014 a decision was handed down accepting the

Appeal filed by ANATEL with the effect of review and also determined that TIM be

subpoenaed to present counter arguments within 15 days. On August 13, 2014 TIM submitted

its counter arguments to the ANATEL Appeal. On August 26, 2014 the case records were sent

to the Federal Appellate Court of the 1st Region.

In addition to the lawsuits mentioned above, there are nine notices of violation filed by the

Consumer Protection Foundation - Procon/SP against TIM Celular based on: (I) alleged abusive







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nature of the clauses contained in the Data Package Agreement; (II) absence of coverage for

TIM Web and TIM Home services in certain locations; (III) failure to comply with a request for

cancellation of an agreement; (IV) charging consumers for handsets not received; (V) alleged

failure to comply with State Law No. 13220/08, involving the "No Call" register (prohibiting

telemarketing); (VI) a newspaper article alleging that telephone companies were restricting

internet use on tablets to pay-as-you-go subscribers; (VII) verification of abusive clauses in a

service agreement; (VIII) shortcomings in services provided due to interruptions in Santa Fé do

Sul and São Paulo, and miscellaneous individual complaints; (IX) failure to comply with Decree

No. 6523/08, dealing with the Customer Call Center (SAC). The fines imposed by the

Procon/SP vary from R$3,192 to R$7,133. TIM has filed its administrative defense in all cases,

but at the appeal level, several fines were upheld and/or are awaiting judgment. In those cases

where the administrative discussion phase has run its course, lawsuits were filed for annulment

of those fines. In the case of "blocking of telemarketing", TIM obtained an injunction

suspending the effects of the administrative decision upon submission of a Letter of Guarantee.

There is still no decision at the judicial level for any of the cases mentioned.

TIM received twelve assessment notices from the Center for Consumer Protection and Defense

- PROCON Londrina/PR, on the grounds of complaints from consumers relating to alleged (I)

incorrect discounts in credit reloading; (II) discounts referring to the "Additional Super

Discount Offer;" "12 Months' Super Discount Offer;" and "Superdiscount TIM postpaid" plans;

(III) cancellation of service and incorrect collection; (IV) onerous offer; (V) obstruction in

cancellation of services agreement; (VI) incorrect registration in credit protection database and

misinformation provided to consumer; (VII) portability problems; (VIII) misleading advertising;

(IX) cancellation problems; (X) receipt of incorrect invoices and unilateral amendment of the

plan; (XI) blocking of handset; (XII) wrong offer of handset, all of them providing for a

monetary fine of R$7,133, each. TIM filed an administrative appeal in all cases above, which is

pending judgment.

TIM Celular S/A, Intelig Telecomunicações Ltda., Oi SA/A, TNL PCS S/A and 14 Brasil

Telecom Móvel S/A filed an innominate provisional remedy against ANATEL, discussing the

pro rata monetary restatement applied to the price proposal established in the call notice for use

of 4G frequencies in a period less than the legal minimum (twelve months). The amount in

dispute totals R$24,586. An injunction was granted on the basis of an interlocutory appeal, so as

to authorize the deposit of the amount in dispute, referring to the monetary restatement

calculation made by ANATEL upon payment of the amount offered by the plaintiffs in their

price proposals regarding the radiofrequencies granted to them. An amendment to the complaint

was approved for conversion of the provisional proceeding into an ordinary proceeding, and

ANATEL is expected to be served a process to challenge the ordinary proceeding. A lower

court decision is still pending.

TIM filed an annulment action against PROCON in the State of Goiás regarding the application

of an administrative fine in the amount of R$5,058, arising from alleged lack of quality in the

provision of services given non-availability of network coverage in Goiânia on May 21, 2013.

TIM intends to cancel the credit by submitting of bank guarantee. A lower court decision is still

pending.

TIM was assessed by the Public Prosecutor’s Office of Minas Gerais in the amount of R$8,721,

due to an administrative proceeding to investigate alleged shortcomings in the services provided







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in the State of Minas Gerais. TIM lodged an administrative appeal and awaits a decision on the

case.

TIM filed an action to annul with request for anticipation of the effects of protection against

Anatel, whereby it argued that the collection of a 2% surcharge on interconnection revenues

should be annulled, because of the extension of the right to use radio frequencies related to

PVCP/SPV Authorization Documents Nos. 002/2006, 074/2008, 086/2008, 085/2008, 084/2004

and 087/2008, declaring unenforceable the debits included in Administrative Tax Proceedings

Nos. 53500.009876/2009, 53500.009509/2010, 53500.009511/2010, 53500.009512/2010,

53500.009523/2010 and 53500.009557/2010, for a total of R$34,181. The lawsuit was

distributed in the 9th Federal Court of Brasília, which ruled in favor of the injunction and

suspended the enforceability of the debit ANATEL appealed, claiming the guarantee insurance

as a counter guarantee for the anticipated protection. On March 12, 2014, a ruling was handed

down denying continuance, monocratically, of ANATEL’s, upholding the injunction against a

security bond. Enforceability of the 2% debit under Administrative Proceeding No. 9876 is thus

still suspended. On June 3, 2014 TIM was subpoenaed to present its reply and on June 13, 2014

TIM submitted its reply and specified evidence. On August 4, 2014 ANATEL filed a request for

specification of evidence. A lower court decision is still pending.

TIM filed an annulment action against ANATEL regarding payment for extension of

radiofrequency use rights linked to the provision of SMP services on interconnection and SVA

revenues, according to Tax and Administrative Proceeding No. 53500.008519/2012, and

declaration of the debt determined, in the updated amount of R$20,877, as unenforceable.

According to the decision rendered, the lawsuit became moot, since the payment of 2% on SVA

and interconnection had already been analyzed in Action for Payment in Court No.

0020904.41.2012.4.01.3400. As a matter of fact, the subject matter of this Action comprises

only the undisputed amount of 2% levied on SMP services, which ANATEL has refused to

receive. On June 13, 2014 TIM filed a Motion for Clarification. On July 15, 2014 the decision

was published, rejecting the Motion for Clarification by TIM. On July 29, 2014 TIM filed an

Appeal from Final Judgment which was received with both effects on August 6, 2014.

TIM is a defendant in a lawsuit for moral damages filed by an Individual currently in progress

in the Judicial District of Jales, State of São Paulo. The plaintiff is claiming moral damages. The

lower court sentenced TIM to the payment of damages in the amount of R$6 to the plaintiff and

R$5,000 for social damages in favor of two hospitals in the region. TIM is currently waiting for

judgment of the innominate appeal, which granted staying effect to the lower court decision.

TIM filed an action for annulment against the assessment issued by the PROCON/DF, in the

amount of R$3,688, in an administrative proceeding intended to investigate alleged violations to

the Consumer Defense Code (Law 8078/90), the SAC Decree (Law 6523/2008) and pricing

rules (Law 10962/2004). TIM filed an interlocutory appeal for suspension of the enforceability

of the debit. There has been no decision by the lower courts.

TIM is a defendant in an administrative proceeding instituted by the Public Prosecutor’s Office

of Minas Gerais that seeks to ascertain actions that violate consumer relations regarding the

charging of deductibles on mobile broadband data transmission. TIM has submitted its

arguments and provided the Public Prosecutor with clarification. Afterwards the entity handed

down a decision that imposed a fine on TIM of R$5,160. TIM filed an administrative

proceeding which is awaiting judgment.







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Among the lawsuits of Intelig classified as a possible risk, we highlight:

The collection lawsuit filed by Orolix Desenvolvimento de Software Ltda with the 36th Lower

Court of the Rio de Janeiro Jurisdiction, requesting an amount of R$5,433 based on alleged

breach of contract. Intelig has submitted its defense, and the case records are currently under

expert investigation. In February 2012, Orolix filed a reply, but there is still no decision from

the lower court.

Intelig was involved in a creditor’s action filed by Editora JB/Gazeta Mercantil, as there was an

understanding regarding creation of an economic group with the companies belonging to the

Docas Group. As a result, it was decided to freeze Interlig’s accounts in the amount of R$3,942.

Intelig filed an interlocutory appeal which was rejected. Intelig appealed this decision via a

motion for clarification, which was rejected. A decision by the court regarding the admissibility

of a special appeal is awaited.

e.2. Labor claims

e.2.1. Labor claims

A significant percentage of the existing contingencies relate to organizational restructuring

processes, with highlight going to the closure of the Client Relationship Centers (call centers) in

Fortaleza, Salvador and Belo Horizonte, which resulted in the termination of some 800

employees, including in-house staff and outsourced personnel.

Case record 01102-2006-024-03-00-0 refers to a public civil action filed by the Labor Public

Prosecutor's Office of the 3rd

Region, in the State of Minas Gerais, which alleged irregular

outsourcing practices and contained a formal request for collective moral damages. A judgment

was rendered and published on April 16, 2008, in which the first degree acting judge ruled the

Labor Public Prosecutor's Office claims as partially valid, recognizing irregular outsourcing and

collective moral damages. An appeal was filed against this decision, and was dismissed on July

13, 2009. Prior to filing the aforementioned appeal, TIM Celular filed a writ of mandamus to

prevent immediate compliance of the coercive acts imposed by the sentence. In view of the

appeal filed, the writ of mandamus lost its purpose.

In order to obtain staying effects for its appeal, TIM Celular filed an innominate writ of

prevention, which was dismissed without prejudice. In order to reverse the decision of the

Regional Labor Court of the 3rd

Region, TIM Celular filed an appeal against abusive acts of the

judge with the Superior Labor Court, and obtained a favorable decision, which reversed the

Court of Appeals` decision. A motion for clarification was filed, but dismissed. On September

16, 2009, a motion to review was filed, which is pending judgment by the TST (Higher Labor

Court). A ruling was issued on November 22, 2013, denying the request for admissibility of the

outsourcing, and on November 29, 2013, TIM lodged an appeal for Declaratory Embargoes and

issued a summons to the MPT. We filed an appeal with the Federal Supreme Court (STF) and

are awaiting a decision.

As a result of the above mentioned Public Civil Action in Minas Gerais, the Labor Public

Prosecutor's Office of the Federal District filed case number 1218-2009-007-10-00-8 (Public

Civil Action), alleging irregular outsourcing practices and a formal request for collective moral

damages. The action was ruled groundless, establishing that, as a result of the General







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Telecommunications Law, all outsourcing in the telecommunications sector is legal. The Labor

Public Prosecutor's Office filed an Ordinary Appeal with the Regional Labor Court (TRT) of the

10th Region in March/2010, the decision of the 1

st instance being maintained, namely that the

intention of the Labor Public Prosecutor's Office is without foundation. Dissatisfied with the

decision, the Public Prosecutor's Office filed for a review, which is still waiting to be heard by

the TST.

A group of actions have been filed in the State of Paraná, involving claims for damages in

connection with contractual provisions stamped in the employees` work cards. According to an

internal rule, TELEPAR undertook to supplement the retirement benefits of employees hired up

until 1982. Prior to privatization, TELEPAR had proposed to implement this benefit by means

of the payment of a certain amount in cash.

It should also be pointed out that there is a group of labor claims, particularly in São Paulo and

Rio de Janeiro, from former Gazeta Mercantil, Jornal do Brasil and JB Editora employees who

have filed claims requesting inclusion of Holdco or TIM Participações as defendants, with later

payment of damages. We point out that the plaintiffs were employees of the company Gazeta

Mercantil, Jornal do Brasil and JB Editora, without any employment ties with Holdco or TIM

Participações. It should be stressed that prior to the merger with TIM Participações, Holdco

belonged to the Docas economic group, of which Gazeta Mercantil and Jornal do Brasil is part.

e.2.2. Social Security

In São Paulo TIM Celular received a Debit Assessment Notice referring to alleged irregularity

in the payment of social security contributions in connection with the payment of profit-sharing

in the amount of R$4,713. The subsidiary filed its administrative defense, but on September 16,

2009, a decision was rendered which upheld the assessment notice. On October 5, 2009, an

administrative appeal was filed, but the assessment was upheld. On account of the final decision

on the assessment at the administrative level, an action was filed for reversal of the assessment,

and a decision is now awaited.

In May 2006, TIM Celular was assessed under tax assessment notice No. 35611926-2 for social

security contributions that were allegedly due in connection with the following: (i) hiring bonus;

(ii) non-adjusted bonus; (iii) payments to self-employed persons; and (iv) sales incentives. The

company filed an administrative defense but this did not reverse the tax assessment (decision -

assessment). In an attempt to get this decision reversed, TIM Celular filed an appeal with the

Ministry of Finance's Taxpayers' Council, which is now pending judgment.

Intelig in Rio de Janeiro received Tax Assessments for Entry of Debits regarding alleged

irregularity in the payment of social security contributions levied on the following cases: (i)

profit sharing; (ii) retention of 11% on services agreements; (iii) failure to deduct and pay on

management's fees and (iv) failure to properly fill out the GFIP. Administrative defense was

presented, with an unfavorable outcome (decision-notification) for undoing the entry. In order to

have this decision changed, Intelig filed an appeal with the Taxpayers Commission of the

Ministry of Finance, which upheld the assessment. On account of the final decision on the

assessment at the administrative level, involving the retention of 11% in services agreements, an

action was filed to have the assessment reversed.

e.3. Tax claims







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e.3.1. IR and CSLL

On October 30, 2006, TIM Celular received tax assessment notices which initially amounted to

R$331,171. In March 2007, the Federal Revenue Secretariat in Recife, State of Pernambuco,

notified the subsidiary by means of a Tax Information Report, which informed the company that

part of the amounts in connection with income and social contribution taxes and a separate fine,

which added up to a total of R$73,027 (principal and separate fine) had been excluded from the

assessment notice. Thus the final amount of the infraction notice was set at R$258,144. TIM

Celular filed an appeal, which in June 2013 was forwarded to the 2nd

Ordinary Panel of the 4th

Chamber of the 1st Section of the Administrative Tax Appeals Council (CARF). We are

currently waiting for the trial to be held.

These tax assessment notices make up the same administrative proceeding, and include

demands in connection with the alleged failure to pay income and social contribution taxes,

together with a separate unrelated fine for various reasons. Most of these relate to the

amortization of goodwill resulting from the privatization auction of the Telebrás System and

related tax deductions. Under Law No. 9532/97, Article 7, the proceeds of goodwill

amortization can be included in the actual profit of a subsidiary created as a result of a merger,

spin-off or consolidation, whereby one company has a stake in the other, with said stake being

acquired based on the future profitability of the investee. It should be stressed that this is a

normal market transaction and is in accordance with CVM (Brazilian Securities Commission)

Instruction No. 319/99.

The Tax Information Report mentioned did indeed lead to part of the infractions contained in

the assessment notice, which discussed the timely adaptation of the deductibility of the goodwill

for several specific federal tax offsetting proceedings amounting to R$86,633, these arising

from set-offs involving this recognition. In September 2009 and April 2011, a decision was

rendered partially favorable to TIM Celular for some of the offsetting proceedings, reducing

part of the credit offset by the subsidiary. The subsidiary continues to challenge the remainder

of the offsetting proceedings, part at the administrative level totaling R$70,366 and part at the

judicial level totaling R$16,267.

In December 2010, TIM Celular received an infraction notice served by the Federal Revenue

Department in the State of São Paulo in the amount of R$164,102 involving (i) the alleged non-

addition to the income and social contribution taxes of the amount referring to the amortization

of the goodwill from the acquisition of shares of Tele Nordeste Celular Participações; (ii)

exclusion of the amortized goodwill; (iii) deduction of corporate income tax by way of fiscal

incentive for reduction of tax and allegedly non-refundable additional amounts on account of

the alleged failure to formalize with the Federal Revenue Service the incentive granted by the

SUDENE. This tax assessment notice was immediately challenged by the subsidiary. In June

2013, the 2nd

Panel of the 1st Chamber of the CARF partially ruled in favor of the voluntary

appeal filed by the subsidiary. On December 31, 2013, the National Treasury Prosecutor’s

Office lodged a Special Appeal, which is currently being studied for admissibility.

In March 2011, TIM Celular, as successor to TIM Nordeste (the new name of Maxitel following

the incorporation of TIM Nordeste Telecomunicações) received a tax assessment notice filed by

the Federal Revenue Department of the State of Pernambuco, amounting to R$1,265,346

concerning income and social contribution taxes referring to: (i) deduction of goodwill







95

amortization expenses; (ii) exclusion of the reversal of the goodwill from the former BITEL;

(iii) improper set-off of tax losses and negative bases by disregarding the incorporation of TIM

Nordeste Telecomunicações by Maxitel; (iv) improper use of the (Sudene) income tax reduction

tax benefit in 2006, for alleged failure to formalize the benefit with the Federal Revenue

Department; (v) deductions of WHT without proof of payment; (vi) deduction of estimates

without proof of payment; (vii) one-off penalty for underpayment of estimates; (viii) regulatory

penalty for omitting information and failure to produce digital files and (ix) supplementary entry

to the administrative proceeding mentioned in the above paragraph. This notice was

immediately contested by the subsidiary.

The first judgment at the administrative level was confirmed, and the assessment notice was

fully ratified. Additionally, the subsidiary, on a timely basis, submitted its appeal to the CARF,

and, based on case law related to companies having similar causes, where such companies were

rendered a favorable judgment, TIM Celular, however, considering all existing precedents,

maintains its estimate of possible loss. In May 2013, the voluntary appeal filed by the company

was forwarded to the 3rd

Panel of the 1st Chamber of the CARF, and is currently waiting to go to

court.

e.3.2. IRRF, CSLL and CIDE

In February 2003, TIM Celular received a tax assessment notice drawn up by the Federal

Revenue Department on the grounds of non-homologation of offsetting PIS and COFINS debts

against Negative Income Tax balance ascertained in DIPJ/2003 (civil year 2002), in the total

amount of R$72,499. In May 2013, the risk classification was amended on the recommendation

of the sponsors of the lawsuit, given the evolution of case law in this respect. For this reason the

amount of R$11,765 was classified, in the past, as probable risk, with the remaining R$60,733

as possible risk. We are awaiting the second administrative instance judgment. In December

2013 the Company formally joined the Federal Refis scheme, and settlement was subsequently

confirmed.

In December 2006, the subsidiary Intelig received notification from the Federal Revenue

Department amounting to R$49,652, arising from the alleged failure to pay IRRF and CIDE on

remittances abroad by way of remuneration for outbound traffic. This notification was being

challenged at the administrative level. After judgment, in May 2012, the notification was upheld

on the grounds that the Company opted for discussion at the judicial level. In October 2012, an

administrative request for write-off of amounts was filed due to the final favorable decision on

the writ of mandamus. In October 2012, the Federal Revenue Office pronounced itself regarding

the exclusion of IRRF in the amount of R$30,098, maintaining the payment only of CIDE in the

historical amount of R$19,554. Against this decision, a hierarchical appeal was filed in

November 2012; however, it was denied in December of the same year. In February 2013, a

lawsuit was filed on behalf of INTELIG, with the purpose of annulling the CIDE tax credit

arising from remittances abroad in the amount referred to above. Regarding the tax credit

arising from IRRF, the amount collected was administratively annulled, and the remaining

CIDE amount of R$39,957 is still being disputed. A Performance Bond was offered, and a

preliminary injunction was granted in favor of the Company. In October 2013, the proper Tax

Execution Action was filed, being currently stayed as a result of the injunction granted in the

case records of the action for annulment. The risk is classified as possible, taking into account

the favorable precedents determined by the Judicial Branch.







96

In May 2010, TIM Celular received three tax assessment notices from the Federal Revenue

Department in São Paulo, amounting to R$50,026 involving: (i) failure to pay IRRF on earnings

of overseas residents remitted as international roaming and payment to unidentified

beneficiaries; (ii) failure to pay CIDE on payment of royalties on remittances abroad, as well as

on remittances concerning international roaming; and (iii) reductions to fiscal losses

(IRPJ/CSLL) referring to the deduction of unproven expenses by way of technical services.

These assessments were immediately challenged by the subsidiary and are awaiting a decision

at the administrative level. A portion of these tax assessment notices in the restated amount of

R$2,773 was classified as probable loss and, therefore, provided in November 2011.

In November 2010, TIM Celular filed a lawsuit aiming at ensuring the right not to pay CSLL on

monetary variations arising from swap transactions, in the total amount of R$35,662. We are

awaiting the second administrative instance judgment.

In February 2012 and December 2013, TIM Celular received 3 tax assessment notices from the

Federal Revenue Service in São Paulo, amounting to R$186,935, where loss has been classified

as possible. These involve: (i) CIDE tax on overseas remittances; and (ii) income tax at source

on royalties and payments for technical assistance for persons residing or domiciled abroad.

These assessments were contested on a timely basis by the subsidiary, and we are awaiting the

first administrative instance judgment.

In July and August 2014 TIM Celular received assessments from the Brazilian Federal Revenue

Service constituting the collection of tax credits on IPRJ, PIS/COFINS and CSLL taxes

regarding the non-validation of credits for (i) withholding tax at source on financial investments

and negative IRPJ balances used to offset CSLL and COFINS taxes due in December 2012 and

July 2011 and (ii) partial validation of the request to recognize credits regarding Law No.

9718/98 used to offset debits of PIS/COFINS and IRPJ taxes referring to October 2012 and

November 2012. The amount involved stands at R$68,252. The assessments were contested in a

timely manner.

In September 2014 TIM Celular filed a suit against the Brazilian government in a effort to

suspend any debits arising from non-validation of the set-offs, taking into account the

cancelation of part of the credits on the negative balances for calendar years 2008 and 2009 and

the recomposition of the IRPJ and CSLL tax base of the former TIM Nordeste. Surety letters

were presented and a preliminary injunction was granted in the subsidiary’s favor. The total

amount involved is R$140,009.

e.3.3. ICMS

TIM Celular received assessment notices from the tax authorities of the State of Santa Catarina

in 2003 and 2004, mainly relating to disputes regarding the levying of ICMS on

telecommunication services provided by the Subsidiary and allegedly not paid, as well as in

connection with the sale of phone sets. The amount that is now being disputed is R$25,427 of

which R$19,675 is classified as possible risk and R$5,753 as probable risk. The original tax

assessment was for the sum of R$95,449.

In October 2009 and June 2011 the subsidiary TIM Celular received tax assessment notices

drawn up by the tax authorities of the States of Bahia and Ceará concerning (i) alleged double

entries; absence of tax documents attesting to entitlement to ICMS credits; application of







97

incorrect rates; booking of taxable services as non-taxable; (ii) failure to make ICMS payments

for having failed to produce documentary proof of the reversal of the debit. The tax assessment

notices issued by the State of Ceará are being defended at the administrative level, and total

R$50,154. Given the conclusion of the administrative phase, the tax credit recorded by the State

of Bahia is being contested at the judicial level, and the parent company submitted, as

established by court order, a bank guarantee to support the claim. The amount involved totals

R$25,309. In June 2014 a provision amounting to R$3,564 was set up to cover part of the

amount involved.

In October 2003, TIM Celular filed a Writ of Mandamus for the purpose of waiving the charge

of 2% (two per cent) referring to the State Fund against Poverty (FECOP) on pre-paid cards. Up

to November 2013, the subsidiary made a monthly judicial deposit of the amounts ascertained,

which currently total R$51,368. In December 2013, the Company therefore paid the

corresponding sums to FECOP, without, however, cancelling the Writ of Mandamus.

TIM has received tax execution notices for ICMS filed by the State of Rio de Janeiro for

allegedly defaulting on payment of the tax on international roaming services provided, The

aforementioned collection is being challenged at the judicial level and amounts to R$27,900.

TIM Celular received tax assessment notices drawn up by the tax authorities of the States of

Bahia and São Paulo for the respective sums of R$16,406 and R$46,923 alleging failure to

proportionally reverse ICMS credits on shipment of exempt and non-taxed goods. The tax

assessment notice drawn up by the tax authorities of the State of São Paulo was challenged at

the administrative level, and is pending judgment. Given the conclusion of the administrative

proceedings, legal action was filed and bonds were posted. The total amount involved is

R$109,896.

TIM Celular received assessment notices from the tax authorities of the States of São Paulo and

Minas Gerais for the respective sums of R$469,776 and R$24,771, for allegedly having failed to

include conditional discounts offered to clients in the ICMS basis of calculation, in addition to

non-compliance with an ancillary obligation. One of the proceedings filed in the State of São is

currently being discussed at the judicial level, in the amount of R$386,713. This subsidiary

intends to challenge the aforementioned collections at the higher court.

TIM Celular received in 2009, 2011 and 2012 tax assessment notices for the total sum of

R$201,838 drawn up by the tax authorities of the States of Paraná, R$14,785, Pernambuco,

R$20,436, Rio de Janeiro, R$33,019, São Paulo, R$51,201, Ceará, R$42,537, Paraíba,

R$14,083 and Bahia, R$25,777, in connection with an alleged debit arising from taking ICMS

credit on the purchase of electric energy. The aforementioned assessments are being challenged

at the administrative level, R$47,804, and at the judicial level, R$154,036.

TIM Celular received assessment notices from the tax authorities of the States of Paraná and

Paraíba, in the amounts of R$24,047 and R$28,668, respectively, involving alleged failure to

pay ICMS levied on telecommunication services provided (pre-paid model) - outgoing

telephone card operations. Due to the closing of the administrative proceeding in the State of

Paraíba, the subsidiary filed a legal remedy to post a Performance Bond in the amount of

R$53,899. The assessment in the State of Paraná is being defended at the administrative level.

Recently, the subsidiary reclassified part of the amounts involved to probable loss, and

consequently recorded a provision –of R$17,049 for the assessment in the State of Paraná and







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R$5,957 for the collection made by the State of Paraíba.

In September 2007, November 2010, June, November and December 2011, July and November

2012, and July 2013, TIM Celular received assessment notices drawn up by the tax authorities

of the States of São Paulo, Rio Grande do Sul, Rio de Janeiro, Paraíba, Paraná and Bahia for an

amount of R$636,535 involving points raised by the tax inspectors about the alleged reversal of

ICMS tax credits regarding the acquisition of permanent assets allegedly without proof of origin

of these entries in the CIAP (Control of ICMS Credits on Permanent Assets) Book. These

assessments are being challenged at the administrative level, in the amount of R$236,424, and

in the judicial level, in the amount of R$400,111.

In May 2011, TIM Celular received a tax assessment notice drawn up by the State of São Paulo

in the amount of R$367,860 involving (i) a penalty for alleged non compliance with an ancillary

obligation for the alleged failure to present the 60i register of the SINTEGRA file for 2007 and

2008; and (ii) the alleged failure to pay ICMS on discounts deemed by the tax inspector to be

conditional. The proceeding is pending decision by the administrative court of appeals. In

December 2012, the subsidiary filed a legal action and posted bonds to discuss a tax credit in the

amount of R$82,390 recorded against it by the tax authorities of the State of São Paulo, for

collection of a fine resulting from alleged non-compliance with ancillary obligations.

In July 2011, TIM Celular filed a lawsuit aiming to discuss a tax assessment notice drawn up by

the State of São Paulo regarding an alleged incorrect ICMS tax credit, due to annulment of

Telecom services as a result of incorrect invoicing/subscription fraud from March to December

2008, as well as regarding an alleged incorrect ICMS tax credit and overpayment in August and

September 2008, in the amount of R$19,165.

In July, September and October 2011 and December 2012, TIM Celular received a tax

assessment notices from the tax authorities of the States of São Paulo, Mato Grosso, Paraíba and

Minas Gerais in the amount of R$410,581, involving (i) alleged failure to pay ICMS tax from

having failed to include in the calculation tax on communication services referring to

installments taxed as "non-taxable/exempt"; and (ii) alleged failure to pay ICMS tax for having

included on tax receipts the negative base by way of financial credits granted to customers

involving services contested, leading to the reversal of debits without complying with the

legislation. These assessments are being challenged by the subsidiary at the administrative and

judicial level. The amount of R$396,690 has been classified as a possible risk, while R$13,891

has been reclassified as a remote risk on account of the partial success obtained in the tax

review procedure.

In December 2011, TIM Celular received a tax assessment filed by the State of Paraná

amounting to R$63,101, alleging improper availment of ICMS credits referring to the period

from May 2010 to August 2011. This assessment is being contested by the subsidiary at the

administrative level.

In December 2011, the subsidiary Intelig filed a suit to contest the tax assessment notice filed by

the State of São Paulo, in the amount of R$20,285, which alleges improper availment of ICMS

credits referring to the reversal of debits declared in the ancillary obligations of the state relating

to tax events occurring in February, November and December 2003. This assessment is being

contested at the judicial level.







99

In January 2012, TIM Celular filed a suit to discuss the debt charged by the State of São Paulo

on the alleged failure to pay the ICMS tax, as verified upon comparing the tax control register to

the accessory obligation, and failure to submit the electronic file - Agreement 115, in the

amount of R$34,638, regarding the administrative collection made in the year 2009. In October

2012, the Tax Execution was received. The advanced guarantee previously offered was

transferred to the Tax Execution, and a motion for execution was filed.

In March 2012, TIM Celular received a tax assessment notice drawn up by the Federal Revenue

Department of the State of Rio de Janeiro, in the amount of R$15,603, with respect to

extemporaneous credits arising from the acquisition of property, plant and equipment. Such tax

assessment notice is being discussed also at the judicial level, through a Writ of Mandamus.

In May 2012, TIM Celular received a tax assessment notice drawn up by the tax authorities of

the State of São Paulo, in the amount of R$56,082, regarding ICMS tax difference on the

amount of inventories existing on May 31, 2009, before the effectiveness of ST in the State of

São Paulo in 2009. Such tax assessment notice is being discussed by the subsidiary at the


In May and July 2012, TIM Celular received two tax assessment notices from the States of Rio

de Janeiro and Bahia with respect to a alleged incorrect ICMS tax credit related to the reversal

of debts from tax on the provision of telecommunications services, in the amounts of R$21,159

and R$16,463 respectively, totaling R$37,622. The subsidiary is discussing these assessments at

the administrative level. Due to the closing of the administrative phase in the State of Bahia, the

subsidiary filed a legal remedy to post a Bond in the amount of R$19,208. TIM Celular is

defending this administrative proceeding in the State of Rio de Janeiro.

In June 2012, TIM Celular received from the State of São Paulo a tax assessment notice in the

amount of R$23,571 regarding alleged failure to pay or delay in paying ICMS tax on

transactions involving receipt of goods subject to the Tax Substitution Regime. The subsidiary

has challenged such tax assessment notice.

In January 2013, TIM Celular received a tax assessment notice from the State of São Paulo in

the amount of R$16,475 regarding an alleged improper credit of an amount entered in the July

2012 GIA, arising from refusal of a request for ICMS tax credit offset. The tax assessment

notice has been defended administratively and is awaiting first-instance judgment.

In January and April 2013, TIM Celular received two tax assessment notices from the State of

São Paulo regarding an alleged improper ICMS credit arising from the interstate purchase of

goods with tax benefit granted in the State of origin (DF) in the amounts of R$80,695 and

R$35,500. The tax assessment notices are being defended administratively and are awaiting

judgment by the court of appeals.

In February 2013, TIM Celular received a tax assessment notice from the State of Ceará

regarding an alleged lack of total or partial payment of ICMS, including the amount owed for

tax substitution referring to the years 2008 and 2009, in the amount of R$105,094. The tax

assessment notice has been defended administratively and is awaiting first-instance judgment. In

December 2013, the subsidiary reclassified the chances of loss as a probable risk and recorded a

provision for part of the amount assessed, totaling R$2,436.







100

In May 2013, TIM Celular received service of process for Tax Foreclosure handed down by the

State of Rio Grande do Norte, for the collection of tax credits of R$17,918 in ICMS tax and

FECOP arising from having allegedly committed several violations, including (i) alleged

improper appropriation of credits on goods intended for permanent assets; (ii) non-payment of

ICMS tax levied on communication services and the sale of goods ascertained by cross checking

the information on the company's tax and accounting entries.

In September 2013, TIM Celular filed a legal action and posted the proper bonds to discuss a tax

credit recorded by the State of Bahia, upon issuance of a tax assessment notice to collect ICMS

tax resulting from alleged purchase and sale transactions involving goods without the respective

accounting entry. The amount involved is R$17,242.

In December 2013, TIM Celular received a tax assessment notice in the amount of R$582,702

issued by the State Treasury Office of the Federal District due to alleged underpayment of

ICMS tax resulting from the use of a tax benefit (Pró-DF) granted by the tax authority, but

declared unconstitutional by the Court of Justice of the Federal District. The subsidiary is being

defended at the administrative level.

In May 2014, TIM Celular received a tax assessment notice filed by the State of São Paulo

regarding the payment of ICMS and fine for alleged undue credit of this tax for the months from

January through November 2009 as a result of the recording of credits regarding the return of

cellphones assigned as free lease. The fine amounts to R$20,358. The subsidiary is being

defended at the administrative level.

In May 2014, TIM Celular received a tax assessment notice filed by the State of São Paulo in

the amount of R$27,589, on the grounds of undue reversal of ICMS amounts. The assessment is

being discussed by the subsidiary at the administrative level. A portion of the amount assessed

was classified as probable risk, and the amount of R$7,519 was provisioned.

In July 2014 a suit was filed against the State of Bahia on account of the closure in the

administrative sphere of the assessment for constituting and collecting ICMS tax credits arising

from the alleged exit of goods without tax documentation and alleged omissions on the entry of

goods (inventory discrepancies) between January and December 2005. In order to guarantee the

debit, a surety letter was submitted. The total amount being contested is R$18,435.

e.3.4. Municipal claims

On December 20, 2007, TIM Celular received an assessment notice from the municipality of

Rio de Janeiro for the amount of R$94,359 for allegedly failing to pay ISS on the following

services: technical programming, administrative service of plan cancellation, telephone

directory assistance service, provision of data and information and network infrastructure

sharing. The aforementioned assessments are being challenged by the subsidiary at the


Since March 2011, TIM Celular has been served with tax assessment, currently 71, notices

drawn up by the municipality of São Paulo, with respect to ISS plus fines imposed on the

Company's several revenue accounts, in the amount of R$41,927. Recently, TIM Celular

became aware of the unsuccessful closing at the administrative level of 27 of these tax

assessments, which were forwarded for inclusion in overdue tax liabilities, and subsequent







101

ruling on 7 tax foreclosures totaling R$110,998. The subsidiary arranged for sureties to be

issued so as to judicially guarantee the debits while they are being discussed.

e.3.5. FUST - Telecommunications Services Universalization Fund

On December 15, 2005, ANATEL issued its Abstract No. 07 aimed, among other things, at

charging FUST contributions on the interconnection revenues earned by the providers of

telecommunications services, from the date upon which Law No. 9998 came into force. It is the

continued understanding of TIM Celular that based on the provisions contained in the pertinent

legislation (including the provision in the sole paragraph of Article 6 of Law No. 9998/00), the

abovementioned revenues are not subject to the FUST charge. Management has taken the

necessary measures to protect the interests of the subsidiary company. To that end, a writ of

mandamus was filed to protect the interests of TIM Celular in connection with the non-payment

of FUST on interconnection revenues. ANATEL's intention to charge FUST on such revenues

has been suspended, due to the judicial decision in favor of the subsidiary company. The writ of

mandamus is pending the decision from the court of appeals.

Since October 2006, ANATEL has issued a number of assessment notices against the subsidiary

TIM Celular, in connection with FUST charges that are allegedly due on interconnection

revenues for the years from 2001 to 2009, together with a fine for arrears, on account of

Abstract No. 07/05. Up to June 2014 the total losses classified as possible involving these

assessments was R$728,217. In September 2014, after successive diligences with the regulatory

body, TIM Celular saw the amounts assessed between January 2005 and December 2006

recalculated, which led to an increase in the amounts classified as possible losses, which

currently stands at R$808,976.

That same month, part of the amounts in the assessments against TIM Celular in November

2012 and June 2014, after evaluations by the lawyers handling the case, were reclassified as

remote risks on account of the payment into court by the subsidiary. The reclassified amount

stands at R$28,517.

The subsidiary Intelig has received a number of assessment notices from ANATEL, which add

up to a total amount of R$76,066 in connection with FUST charges that are allegedly due on

interconnection revenues for the periods from January to December 2001 to 2009. The

aforementioned assessments are being challenged at the administrative level.

In June 2014, TIM Celular received two assessment notices issued by ANATEL in connection

with FUST charges regarding base year 2010 in the amounts of R$140,354 and R$1,898

respectively. In the same month, Intelig also received a tax assessment notice issued by

ANATEL charging said contribution for the year 2010, in the amount of R$10,302. The term for

challenging the assessments has been suspended due to the formalization of the request for a full

copy of the proceedings to the regulatory authority, particularly regarding the access to the

inspection report and, consequently, the nature of said assessment. Initially, the subsidiaries will

file for a defense at the administrative level. After obtaining copies, the subsidiaries submitted

their administrative defenses and are awaiting judgment.

e.3.6. FUNTTEL - Telecommunications Technological Development Fund

The Ministry of Communications drew up assessment notices against the subsidiary TIM







102

Celular in the amount of R$300,495, in connection with FUNTTEL amounts due on

interconnection revenues for the years from 2001 to 2009, as well as a fine for arrears. It is the

continued understanding of the subsidiary that the above mentioned revenues are not subject to

FUNTTEL. A writ of mandamus was filed to safeguard the subsidiary's interests in relation to

the non-payment of FUNTTEL on interconnection revenues, on the same grounds as those used

for the FUST process. The intention to charge FUNTTEL on interconnection revenues is under

suspension, due to a favorable ruling obtained in relation to the writ of mandamus that was filed

by the subsidiary.

The subsidiary Intelig has received a number of assessment notices from the Ministry of

Communications, which add up to a total amount of R$22,001 in connection with FUNTTEL

charges that are allegedly due on interconnection revenues for the period from 2002 to 2009.

The aforementioned assessments are being challenged at the administrative level.

e.4. Regulatory proceedings

(e.4.1) Due to an alleged failure to comply with some of the provisions set out in the RSMP

(Personal Mobile Service Regulations), the STFC (Switched Landline Telephone Service

Regulations) and the quality targets defined under the General Quality Targets Plan (PGMQ) for

SMP (PGMQ-SMP) and STFC (PGMQ-STFC), Anatel filed 97 Procedures for the

Determination of Non-Compliance of Obligations (PADO), involving the subsidiaries, as of

September 30, 2014.

TIM Celular is authorized to provide SMP services in all Brazilian states and the federal District

for an indefinite period, and to use the associated radio frequencies, having obtained an

extension from Anatel of the authorizations for such radio-frequency usage, under the

Instruments of Authorization, for a period of 15 years counting from the end of the original

period of validity of these authorizations.

Since February 2011, TIM Celular has been discussing at the administrative level, and

subsequently, at the judicial level, a charge of 2% on interconnection revenue concerning the

cumulative payment of extensions of right of use of radio frequency renewals, given the

understanding that there is no regulatory obligation associated to payments other than those

exclusively linked to direct revenues from their service plans, through administrative

proceedings Nos. 53500.009876/2009, 53500.007487/2011, 53500.008519/2012,

53500.00584/2013 and 53500.10097/2014.

In November 2012, Anatel published Precedent No. 13/2012, whereby the Board of Directors of

this Agency issues its understanding that "The base for calculation of the amount payable for

the renewal of the right to use radio frequencies, as set forth in the Instruments of Authorization

for the provision of the Personal Mobile Service (SMP), includes, among others, revenue from

interconnection and from additional conveniences as well as operating revenue from the

provision of SMP." Thus, on December 21, 2012, TIM submitted to Anatel the Request for

Annulment of Precedent No. 13/2012, which is still pending analysis.

After inspections, Anatel charged “additional amounts” through Case No. 53500.003758/2013,

53500.003757/2013 and 53500.014732/2014 regarding the extension of the right to use radio

frequencies associated with the provision of the Personal Mobile Service (SMP) which are

being discussed in the administrative sphere.







103

As from the expiry of the year 2012, in addition to Interconnection revenues, revenues from

Value Added Services were included by Anatel in calculating the 2% charge on the contractual

burden resulting from the extension of the right to use radio frequencies associated with the

provision of the Personal Mobile Service (SMP), which is also being contested by TIM Celular

in those cases (53500.008519/2012, 53500.005844/2013 and 53500.10097/2014).

On February 2014, in Action for Annulment proceeding No. 48301-75.2012.4.01.3400, TIM’s

claim was upheld, “decreeing the annulment of the collection of the price for extension of the

right to use the radio frequencies for supply of Personal Mobile Services on the revenues

relating to interconnection, under administrative tax proceeding No. 53500.0007487/2011”. As

this is a decision of the lower court, the Regulatory Agency may still appeal.

On May 6, 2014, a court deposit was made in the amount of R$39,460 regarding the burden of

2% on revenues from service plans in the states of Santa Catarina, Ceará, Alagoas, Paraíba, Rio

Grande do Norte, Bahia and Sergipe, and on July 15, 2014, the amount of R$12,181 was paid

referring to the collection slip of the 2% burden regarding the VAS installment maturing in

April 2013.

Furthermore, in view of the extension of authorization of usage of the radio frequencies

associated with SMP, the subject matter of the above mentioned Instruments of Authorization

issued in accordance with the respective acts, the Company received demands from Anatel for

payment of a new Facilities Inspection Fee (TFI) for all its mobile stations in operation in the

service-provision area, although these stations have already been licensed, for the sums shown

in the table below.

State

Instrument of

authorization

Expiry Date

Act

Amount

Paraná (excluding the municipalities of Londrina and

Tamarana)

002/2006/PVCP/SPV

09/03/2022

57.551 dated 4/13/2006

R$80,066 Santa Catarina 074/2008/PVCP/SPV 09/30/2023 5.520 dated 9/18/2008 R$54,026

Municipality and region of

Pelotas in Rio Grande do Sul

001/2009/PVCP/SPV

4/14//2024

1.848 dated 4/13/2009

R$333 Ceará 084/2008/PVCP/SPV 11/28/2023 7.385 dated 11/27/2008 R$41,728

Alagoas 085/2008/PVCP/SPV 12/15/2023 7.383 dated 11/27/2008 R$20,038

Rio Grande do Norte 087/2008/PVCP/SPV 12/31/2023 7.390 dated 11/27/2008 R$19,844 Paraíba 086/2008/PVCP/SPV 12/31/2023 7.386 dated 11/27/2008 R$15,020

Piauí 088/2008/PVCP/SPV 3/27/2024 7.389 dated 11/27/2008 R$13,497

Pernambuco 089/2008/PVCP/SPV 5/15/2024 7.388 dated 11/27/2008 R$54,000 Bahia and Sergipe 412/2012/PVCP/SPV 8/06/2027 3.833 dated 7/06/2012 R$110,803

MG 172/2013/PVCP/SPV 4/07/2028 710 dated 1/30/2013 R$185,647

The demand for payment of TFI is a result of Anatel's understanding of the due application of

the provision of Article 9, sub-section III, of the Regulations for Collection of Revenues of the

FISTEL Telecommunications Inspection Fund, approved by Resolution No. 255, which foresees

the levying of TFI on the station at such time as the license is renewed, which entails the issuing

of a new license. However, in the Company's understanding, this does not appear to be the

correct interpretation of the provisions of the legislation applicable to the matter at hand, which

is why the aforementioned charge was the cause for the timely challenge at the administrative

level, which was refuted by Anatel. After all administrative measures have been taken, the

matter is now being handled at the judicial level, and a favorable Injunction stayed the

enforcement of the charge until the definitive ruling of the suit.







104

According to the Instruments of Authorization for the operation of SMP, TIM Celular agreed to

and undertook in stages the implementation of SMP coverage in relation to its respective

regions, within the scope of the areas it had been awarded in the respective lots. Also referred

to, as the terms of authorization, the Subsidiaries are required to operate within the quality

standards established by Anatel and adhering to the obligations required by the legislation.

Anatel has brought administrative proceedings against the subsidiaries for: (i) failure to meet

with certain quality service indicators; (ii) default on certain obligations assumed under the

Instruments of Authorization; and (iii) non-compliance with the regulations of SMP and STFC,

among others.

The Subsidiaries submitted to Anatel administrative defenses and filed administrative appeals

and requests for reconsideration (through the courts whenever necessary), explaining that the

non-compliance was due to several factors, most of them involuntary and not related to the

activities and actions performed by the companies.

27 Asset retirement obligations

The changes in the obligations deriving from future asset retirement are set forth below:

Consolidated

09/2014 12/2013


Opening balance 299,813 298,808

Additions recorded throughout the period, net of write-offs (3,457) 1,005

Closing balance 296,356 299,813

The provision is recorded based on the following assumptions:

the unitary dismantling costs are estimated, taking into account the services and

materials involved in the process. The estimate is prepared by the network department based on

the information currently available;

a timetable for the dismantling is estimated based on the useful life of the assets and the

estimated costs are allocated through this timetable updated by the expected inflation rate. The

expected inflation rate is aligned with the projections prepared by the main market institutions;

and

the rate used to discount the cash flows is the average debt cost, that was 9.50% p.a. at

September 30, 2014 (8.75% p.a. at December 31, 2013).







105

28 Shareholders' equity

a Capital

Upon resolution by the Board of Directors, without amending the bylaws, the Company is

authorized to increase its capital to up to 4,450,000,000 common shares.

The subscribed capital is represented as follows:

09/2014 12/2013

Value paid-in 9,906,188 9,886,887

(-) Funding costs (47,117) (47,117)

Net value paid-in 9,859,071 9,839,770

Number of common shares 2,420,136,000 2,417,632,647

At a meeting held on September 5, 2014 the Board of Directors of TIM Participações approved

the increase in the company’s equity in the amount of R$19,301, by issuing 2,503,353 new

common shares arising from the exercise of call options by the beneficiaries of the company’s

Lomg-Term Incentive Plan (see note 29).

b Capital reserves

The use of capital reserves is according to the provisions of Article 200 of Law No. 6404/76.

These reserves are comprised as follows: 09/2014 12/2013

Special goodwill reserve 380,560 380,560

Capital reserve - stock options 14,783 10,684

Tax benefit reserve 827,276 826,396

1,222,619 1,217,640

Tax benefit reserve

TIM Celular enjoys tax benefits that provide for restrictions in the distribution of profits of this

subsidiary. According to the legislation that establishes such tax benefits, the amount of taxes

waived as a result of exemptions and reductions in the tax charge may not be distributed to

shareholders, and must be registered as a tax incentive reserve of the legal entity. This reserve

should only be used for absorption of losses or capital increase. The accumulated amount of

benefits which TIM Celular enjoyed at September 30, 2014 was R$827,276.







106

Special goodwill reserve

The special goodwill reserve arose from the following transactions:

(i) Takeover of the former subsidiaries TIM Sul and TIM NE - acquisition of

minority shares

In 2005 the Company acquired all shares held by the minority shareholders of TIM Sul S.A. and

TIM Nordeste Telecomunicações S.A. This acquisition took place by issuing new shares of TIM

Participações S.A., converting those companies into full subsidiaries. At the time, this

transaction was recorded at the book value of the shares, no goodwill being recorded arising

from the difference between market value and the shares negotiated.

When first adopting IFRS, the Company availed itself of the exemption that allows a subsidiary,

when it adopts international accounting practices subsequent to its parent company having

adopted IFRS, to consider the balances previously reported to the parent company for

consolidation purposes. In the balance sheet of the transition to IFRS, the Company recorded the

acquisition price based on the market value of the shares of TIM Participações S.A. at that time,

recording goodwill amounting to R$157,556.

(ii) Acquisition of the shares of Holdco - purchase of Intelig

On December 30, 2009, the Special General Meeting of TIM Participações S.A. approved the

takeover by TIM Participações of Holdco, a company that held 100% of the equity of Intelig. As

a result of this transaction, the Company issued 127,288,023 shares.

Based on the former BR GAAP, the acquisition was recorded at the net book value of the assets

acquired on the base date November 30, 2009.

When IFRS was first adopted, the acquisition was recorded on the base date December 31,

2009, taking into account the market value of the common and preferred shares of TIM

Participações on December 30, 2009, amounting to R$739,729. The difference between this

amount and the book value recorded under the former BR GAAP (R$516,725) created goodwill

against capital reserves of R$223,004.

Stock options

The balances recorded in these items represent the expenses of the Company and its subsidiaries

for the stock options granted to their employees (note 29).

c Revenue reserves

Legal reserve

This refers to 5% of net income for every year ended December 31, until the legal reserve

equals 20% of capital. Also, the Company is authorized to stop setting up a legal reserve when,

together with the Capital Reserves, it exceeds 30% of capital stock. This reserve can be used

only for capital increase or offsetting of accumulated losses.







107

Statutory reserve for expansion

This reserve is set up based on paragraph 2, Article 42 of the Company's bylaws and Article 194

of Law No. 6404/76, and is intended for the expansion of the corporate business.

The balance of profits that are not compulsorily allocated to other reserves or intended for the

payment of dividends, is allocated to this reserve, which may not exceed 80% of the capital.

Once this limit is reached, it is incumbent on the shareholders' meeting to decide on the balance,

either distributing this to shareholders or increasing the capital.

d Dividends

Dividends are calculated in accordance with the bylaws and Brazilian Corporate Law.

As stipulated in its latest bylaws approved on December 12, 2013, the Company must distribute

a mandatory dividend for each business year ended December 31, provided that funds are

available for distribution, in an amount equivalent to 25% of the adjusted net income.

On December 31, 2013, the dividends were calculated as follows: 12/2013

Net income for the year 2013 1,505,614

(-) Legal reserve constitution (75,281)

Adjusted net income 1,430,333

Dividends to be distributed

Minimum dividends calculated considering 25% of the adjusted net income 357,583

Dividends per share (Reais per share) 0.1480

The Annual and General Meeting of TIM Participações S.A. held on April 10, 2014, approved

payment of supplementary dividends, in excess of the mandatory minimum, in the amount of

R$485,722.

29 Stock options

At the annual meeting on August 5, 2011, the shareholders of TIM Participações S.A. approved

the long-term incentives plan for senior management and key executives of the Company and its

subsidiaries.

The exercise of options depends on the simultaneous achievement of two performance targets:

(1) an increase in the price of common shares; and (2) performance of the Company's share

price against a benchmark defined by TIM's Management and composed of shares of other

telecommunications, technology and media companies.

Stock options are effective for 6 years, and the Company has no legal or informal obligation to

repurchase or settle the options in cash.







108

The long-term incentives plan, up to September 30, 2014, consists of 3 grants approved by the

Board of Directors: 2011, 2012 and 2013.

Regarding the 2011 Grant, the first evaluation period, which took place at the end of July 2012

provided for the exercise of 33% of the shares granted. However, no participant chose to

exercise the options.

The following year, at the end of July 2013, the performance conditions were once again

evaluated and as the minimum performance conditions were not met, there was no possibility of

exercising the stock options.

At the end July 2014 the performance conditions we once again evaluated and after meeting the

minimum performance conditions (both relative and absolute) for the three-year period 2012-

2014, the participants were able to exercise 100% of the options granted, resulting in the first

exercise of options since the creation of the long-term incentives plan.

Regarding the 2012 Grant, 33% of the options could not be exercised during the evaluation of

the first vesting, in September 2013 due to non-compliance with the minimum performance

conditions.

66% of the options may be exercised in October 2014 and 100% may be exercised in 2015,

provided the minimum performance conditions are complied with.

The performance conditions for this grant are measured in the 2013-2015 three-year period,

with the measurement calculated based on the share price in the months of July and August of

each year.

With regard to the 2013 Grant, the beginning of the second half of 2014 saw the first valuation

period, and after complying with the (relative and absolute) minimum performance conditions

the participants were able to exercise 33% of the options granted, whereby the participants were

entitled to exercise the options.

At the beginning of the second half of 2015, another portion of 33% may be exercised and the

remainder in 2016, provided the minimum performance conditions are met. The performance

conditions of this grant are measured in the three-year period from 2014 to 2016, and the

measurement is based on the share price in July of each year.

Using the accrual basis of accounting, the expenses related to the long-term benefit plan are

being accounted on a monthly basis and, at the end of the third quarter of 2014 totaled R$4,099.

2011 Grant

On the grant date (August 5, 2011), the exercise price of the options granted was calculated

based on the weighted average price of shares of TIM Participações S.A. This average took into

account the Company's trading volume and share prices in the 30 days prior to July 20, 2011

(when the Board of Directors of the Company approved the benefit).

On August 5, 2011, options were granted for purchase rights on 2,833,596 shares. At September

30, 2014, after applying the eligibility criteria contained in the agreement between TIM







109

Participações S.A. and the participants, 1,532,132 options were exercisable and were exercised

in full.

The significant data included in modeling the Grant were: average weighted share price of

R$8.31 on the grant date; exercise price of R$8.84 and volatility of 51.73% p.a.; stock option

expected life of 6 years and annual risk-free interest rate of 11.94% p.a. Volatility

measurements were based on the price of common shares of TIM over a period of 6 years.

2012 Grant

On the grant date (September 5, 2012), the exercise price of the options granted was calculated

based on the weighted average price of shares of TIM Participações S.A. This average took into

account the Company's trading volume and share prices from July 1, 2012, to August 31, 2012.

On September 5, 2012, options were granted for purchase rights on 2,661,752 shares. At

September 30, 2014, there were no exercisable options.

The significant data included in the model were the following: weighted average share price of

R$8.96 on the grant date and volatility of 50.46%, p.a., stock option expected life of 6 years and

annual risk-free interest rate of 8.89% p.a. Volatility measurements were based on the price of

common shares of TIM over a period of 6 years.

2013 Grant

On the grant date (July 30, 2013), the exercise price of the options granted was calculated based

on the weighted average price of the shares of TIM Participações S.A. Such average took into

account the trading volume and trading price of the Company's shares over the 30-day period

preceding July 20, 2013.

On July 30, 2013, options corresponding to the right to purchase 3,072,418 shares were granted.

As of September 30, 2014, bearing in mind the possibility of exercising 33% of the options and

after applying the eligibility criteria in the agreement between TIM Participações S.A., a total of

971,221 options were exercisable and were exercised in full

The significant data included in the modeling of the Grant were as follows: weighted average

share price of R$8.13 at the grant date; strike price of R$8.13, volatility of 48.45% p.a.; 6 years'

expected life of the stock options, and risk-free annual interest rate of 10.39% p.a. The volatility

was calculated based on the price of common shares of TIM over a period of 6 years.







110

30 Net operating revenue

Consolidated

09/2014 09/2013

Service revenue - Mobile

Subscription and use 8,291,440 8,356,460

Network use 2,008,638 2,819,426

Long distance 2,347,194 2,492,935

VAS - Additional services 4,753,901 3,899,451

Others 199,978 170,268

17,601,151 17,738,540

Service revenue - Landline 674,999 835,781

Service revenue 18,276,150 18,574,321

Goods sold 3,157,420 3,402,532

Gross operating revenue 21,433,570 21,976,853

Deductions from gross revenue

Taxes (4,969,160) (4,817,750)

Discounts given (1,968,692) (2,235,084)

Returns and others (165,997) (186,005)

(7,103,849) (7,238,839)

Total net revenue 14,329,721 14,738,014

31 Cost of services provided and goods sold

Consolidated

09/2014 09/2013

Personnel (57,168) (44,995)

Third party services (331,786) (296,753)

Interconnection and means of connection (2,602,094) (3,434,692)

Depreciation and amortization (1,727,087) (1,547,453)

ANATEL fees (10,010) (9,803)

Rentals and insurance (309,204) (263,776)

Others (17,339) (13,265)

Cost of services provided (5,054,688) (5,610,737)

Cost of goods sold (2,327,709) (2,474,736)

(7,382,397) (8,085,473)







111

32 Sales expenses Consolidated

09/2014 09/2013

Personnel (460,975) (413,979)

Third party services (1,653,945) (1,645,275)

Advertising and publicity (494,422) (450,325)


ANATEL fees (774,974) (777,672)

Depreciation and amortization (119,294) (127,739)


Others (34,987) (26,343)

(3,820,340) (3,692,940)

33 General and administrative expenses Parent company Consolidated

09/2014 09/2013 09/2014 09/2013

Personnel (8,130) (5,263) (188,635) (154,214)

Third party services (9,168) (5,499) (410,516) (380,933)

Depreciation and amortization - - (141,396) (138,736)

Rentals and insurance (145) (137) (48,558) (56,943)

Others (1,011) (577) (36,503) (29,083)

(18,454) (11,476) (825,608) (759,909)

34 Other revenues (expenses), net Parent company Consolidated

09/2014 09/2013 09/2014 09/2013

Revenues

Subsidy income, net - - 7,844 8,797

Fines on telecommunications services - - 26,052 28,373

Other revenues (expenses) - - 3,749 3,551

- - 37,645 40,721

Expenses

FUST/FUNTTEL - - (138,271) (123,220)

Taxes, fees and contributions - - (1,920) (1,226)

Provision for administrative and legal

proceedings - net of reversal (609)

(338)

(189,299) (206,318)

Other operating expenses (21) (5) (17,221) (15,607)

(630) (343) (346,711) (346,371)

Amortization of concessions - - (262,237) (230,882)

(630) (343) (608,948) (577,253)

Other expenses, net (630) (343) (571.303) (536.532)







112

35 Finance income Parent company Consolidated

09/2014 09/2013

09/2014 09/2013

Reclassified

Interest on financial

investments

1,171 716 369,195

162,626

Interest received from clients - - 39,719 49,483

Swap interest - - 38,093 74,776

Interest on leasing - - 26,311 -

Monetary adjustment 514 7,882 41,776 38,746

Exchange variation 118 27 100,499 188,128

Other revenue - 4,759 3,400

1,803 8,625 620,352 517,159

36 Finance costs Parent company Consolidated

09/2014 09/2013 09/2014

09/2013

Reclassified

Interest on loans and financing - - (254,946) (198,411)

Interest paid to suppliers - - (87,529) (15,077)

Interest on taxes and fees 11 (4) (5,247) 19

Swap interest - - (119,003) (125,849)

Interest on leasing - - (32,816) (2,296)

Monetary adjustment (11,032) (9,861) (112,877) (89,869)

Discounts granted - - (58,108) (57,730)

Exchange variation (26) (9) (101,527) (191,103)

Other expenses (201) (95) (31,176) (39,045)

(11,248) (9,969) (803,229) (719,361)

37 Income tax and social contribution expenses Consolidated

09/2014 09/2013

Current tax

Income tax for the period (265,310) (233,765)

Social contribution for the period (98,379) (86,909)

Tax incentive - ADENE 98,859 96,354

(264,830) (224,320)

Deferred income tax

Deferred income tax (144,311) (161,991)

Deferred social contribution (51,952) (58,317)

(196,263) (220,308)

Provision for legal proceedings of income tax and social

contribution (27)

(9,690)

(461,120) (454,318)







113

The reconciliation of income tax and social contribution expenses calculated at the applicable

tax rates plus the amounts reflected in the income statement is set forth below:

Consolidated

09/2014 09/2013

Income before income tax and social contribution 1,547,196 1,460,958

Combined tax rate 34% 34%

Income and social contribution taxes at the combined tax rate (526,047) (496,726)

(Additions)/exclusions:

Unrecognized tax losses and temporary differences (24,461) (50,959)

Permanent additions and exclusions (20,280) (12,817)

Tax incentive - ADENE 98,859 96,353

Other amounts 10,809 9,831

64,927 42,408

Income tax and social contribution charged to income for the period (461,120) (454,318)

According to Article 443, item I, of Decree No. 3000/1999, to subsidies for investments not to

be considered within the taxable income, they must be recorded as capital reserves, to be used

only to absorb losses or increase the share capital. The subsidiary TIM Celular has tax benefits

compliant to these rules, having, therefore, constituted these reserves in the amount of

R$827,276.

The Company analyzed the potential tax impacts related to the dividends distribution in excess

of amounts calculated according to the accounting practices in effect in Brazil as of December

31, 2007 (previous date in relation to the application of Law 11.638/07). The maximum effect of

the adoption of Provisional Measure 627/13, converted into Law 12.973/14, in the next fiscal

year would not produce relevant impacts for the Company, reason why it will not opt for the

application of the referred rule as from 2014. This procedure is in accordance with articles 75

and 96 of Law 12.973/14. As from 2015, it is expected that all Brazilian companies will follow

the new law.







114

38 Earnings per share

(a) Basic

Basic earnings per share are calculated by dividing income attributable to shareholders of the

Company by the weighted average number of shares issued during the year.

09/2014 09/2013

Income attributable to shareholders of the company 1,086,076 1,006,640

Weighted average number of common shares

issued (thousands)

2,417,115

2,416,837

Basic earnings per share (expressed in R$) 0.4493 0.4165

(b) Diluted

Diluted earnings per share are calculated by adjusting the weighted average number of shares

outstanding to assume conversion of all dilutive potential shares.

09/2014 09/2013

Earnings attributable to shareholders of the company 1,086,076 1,006,640

Weighted average number of common shares issued (thousands) 2,418,834 2,416,885

Diluted earnings per share (expressed in R$) 0.4490 0,4165

39 Transactions with Telecom Italia Group

The consolidated balances of transactions with companies of the Telecom Italia Group are as

follows:

Assets

09/2014 12/2013

Telecom Personnel Argentina (1) 2,848 1,484

Telecom Italia Sparkle (1) 26,540 16,949

Lan Group (5) 5,878 7,531

Others 3,809 4,568

Total 39,075 30,532







115

Liabilities

09/2014 12/2013

Telecom Italia S.p.A. (2) 19,396 32,267

Telecom Personel Argentina (1) 1,004 1,435


Italtel (3) 25,026 24,403

Lan Group (4) 18,629 6,603

Others 4,272 4,661

Total 104,817 91,052

Revenue

09/2014 09/2013




Others 479 938

Total 16,349 21,480

Cost/expense

09/2014 09/2013




Lan Group (4) 33,489 24,114

Others 6,129 13,044

Total 63,613 67,067

(1) These amounts refer to roaming, value-added services (VAS) and assignment of means.

(2) These amounts refer to international roaming, technical post-sales assistance and value-added services

(VAS).

(3) The amounts refer to the development and maintenance of software used in invoicing telecommunications

services.

(4) The amounts refer to the lease of links and EILD and signaling services.

(5) The amounts refers to the lease of means (submarine cables).

The balance sheet account balances are recorded in the following groups: accounts receivable,

suppliers and other current assets and liabilities.







116

40 Transactions with Telefónica Group

On April 28, 2007, Assicurazioni Generali SpA, Intesa San Paolo S.p.A, Mediobanca S.p.A,

Sintonia S.p.A and Telefónica S.A., entered into an agreement to, from Telco S.p.A ("Telco"),

come to hold 23.6% of the voting capital of Telecom Itália S.p.A., the indirect parent company

of TIM Participações (the “Transaction”).

Through its Act No. 68.276/2007, published in the Federal Official Gazette of November 5,

2007, ANATEL approved the Transaction and imposed certain restrictions to guarantee absolute

segregation of businesses and operations performed by the Telefónica and TIM groups in Brazil.

For the purposes of ANATEL's requirements, TIM Brasil and TIM Celular submitted to

ANATEL the necessary measures to ensure this segregation de facto and ipso jure in Brazil, so

that Telefonica's participation in Telco S.p.A. could not be characterized as influencing the

financial, operational and strategic decisions made by the operators of the TIM Group in Brasil.

Furthermore, in April 2010, as a condition for the approval of the Transaction by the

Administrative Council of Economic Defense (CADE), related to the Concentration Act No.

53500.012487/2007, Telco´s subsidiaries signed a Performance Commitment Instrument

(TCD), which determined the rules of Telefonica´s shareholding participation on Telecom Italia

deliberations and its governance restrictions to the Brazilian market. TIM Brasil Serviços e

Participações S.A, controlling company of TIM Participações, also signed this TCD agreement

as stakeholder part.

In the supervision of the fulfillment of the TCD in 2013, CADE, after Telefonica´s elucidations

about the new shareholders´ agreement of Telco and the increase in its ownership on capital

stock of that entity, decided to determine, aiming to maintain the initial conditions that enabled

the approval of the Transaction in 2010, the sale by Telefonica, within the period confidentially

stipulated by CADE, of the acquired shares in 2013 that resulted in the increase of Telefonica´s

ownership on the Telco´s capital stock.

TIM continues to operate in the Brazilian market on the same independent and autonomous

basis as before the Transaction, still ensuring transparency of its transactions with the

Telefónica Group in Brazil, including disclosing the total amounts and the nature of such

transactions in its quarterly information.

At September 30, 2014, exclusive agreements between the operators of the TIM group

controlled by TIM Participações and the operators of the Telefónica group in Brazil were in

force in respect of telecommunications services covering interconnection, roaming, site-sharing,

infrastructure-sharing, industrial exploitation for dedicated lines, as well as co-billing long

distance calls agreements, all entered into on an arm's length basis and, when applicable,

considering the Brazilian legislation on telecom services. At September 30, 2014, the

receivables and payables arising from these agreements amounted to R$297,096 and R$93,738

respectively (R$208,988 and R$133,538 at December 31, 2013). The amounts charged to

income by the Company represent revenue and expenses totaling R$929,892 and R$613,802

(R$1,085,959 and R$853,634 at September 30, 2013) respectively.







117

41 Financial instruments and risk management

Through its subsidiaries, the Company performs non-speculative derivative transactions, to (i)

reduce the exchange variation risks and (ii) manage exposure to the interest risks involved. The

company’s derivative financial transactions consist exclusively of swap contracts, and

accordingly, no exotic or any other kind of derivative instrument is involved.

The Company's financial instruments are presented, through its subsidiaries, in compliance with

IAS 32.

Accordingly, the major risk factors to which the Company and its subsidiaries are exposed are

as follows:

(i) Exchange variation risks

Exchange variation risks refer to the possibility of subsidiaries incurring losses on unfavorable

exchange rate fluctuation, which would increase the outstanding balances of borrowings taken

in the market along with the related financial charges. In order to eliminate this kind of risk, the

subsidiaries enter into swap contracts with financial institutions.

At September 30, 2014, the borrowings and financing of the subsidiaries indexed to foreign

currency were fully hedged by swap contracts in terms of time and amount. Any gains or losses

arising from these swap contracts are charged to earnings of the subsidiaries.

Besides the borrowings taken by the subsidiaries, which involve swap contracts, no other

significant financial assets are indexed to foreign currencies.

(ii) Interest rate risks

Interest rate risks relate to:

the possibility of variations in the fair value of TJLP-indexed financing taken by the

subsidiary TIM Celular, when these rates are not proportional to that of the Interbank

Deposit Certificates (CDI). As of September 30, 2014, the parent company TIM Celular

has no swap transactions linked to the TJLP.

the possibility of unfavorable changes in interest rates would result in higher financial

costs for the subsidiaries due to the indebtedness and the obligations assumed by the

subsidiaries under the swap contracts indexed to floating interest rates (CDI percentage).

However, at September 30, 2014, the subsidiaries' financial funds were invested in

Interbank Deposit Certificates (CDI), and this considerably reduces such risk.

(iii) Credit risk inherent in the provision of services

This risk is related to the possibility of the subsidiaries incurring losses from the difficulty in

collecting amounts billed to customers. In order to mitigate this risk, the subsidiaries perform, as

a preventive measure, credit analysis of all orders imputed by sales areas and monitor accounts

receivable from subscribers, blocking the use of services by customers, among other efforts, in

the event that they default on payment of their bills. At September 30, 2014 and December 31,







118

2013, no customers accounted for more than 10% of net receivables from services provided or

of revenue from services rendered in the periods then ended.

(iv) Credit risk inherent in the sale of phone sets and prepaid telephone cards

The policy adopted by the subsidiaries for the sale of phone sets and distribution of prepaid

telephone cards is directly related to credit risk levels accepted in the regular course of business.

The choice of partners, the diversification of the accounts receivable portfolio, the monitoring of

loan conditions, the positions and limits defined for orders placed by traders and the adoption of

guarantees are procedures adopted by the subsidiaries to minimize possible collection problems

with their business partners. At September 30, 2014 and December 31, 2013, no customers

accounted for more than 10% of net receivables from the sale of goods. Furthermore, there are

no customers that contributed with more than 10% of revenue from the sale of goods in 2014

until September.

(v) Financial credit risk

This risk relates to the possibility of the subsidiaries incurring losses from difficulty in realizing

their short-term investments and swap contracts due to bankruptcy of the counterparties. The

subsidiaries minimize the risk associated with these financial instruments by operating only with

sound financial institutions, and adopting policies that establish maximum risk concentration

levels by institution.

Fair value of derivative financial instruments

The consolidated derivative financial instruments are shown as follows:

09/2014 12/2013

Assets Liabilities Net Assets Liabilities Net

Derivative

financial

instruments 329,122 (27,174) 301,948 246,863

(44,418)

202,445

Current portion 28,089 (27,174) 915 11,969 (44,418) (32,449)

Non-current

portion 301,033 - 301,033 234,894

-

234,894

The consolidated financial derivative instruments with long-term maturities at September 30,

2014 have the following maturity schedule: Assets Liabilities

2015 1,708 -

2016 185,216 -

2017 32,275 -

2018 1,741 -

2019 onwards 80,093 -

301,033 -







119

Consolidated financial assets and liabilities measured at fair value

09/2014

Level 1 Level 2 Total balance

Assets

Financial assets valued at fair value through

profit or loss

Trading securities 41,886 41,886

Derivatives used for hedging purposes 329,122 329,122

Total assets 41,886 329,122 371,008

Liabilities

Financial liabilities valued at fair value through

profit or loss


Total liabilities 27,174 27,174

12/2013

Level 1

Level 2

Total

balance

Assets

Financial assets valued at fair value through

profit or loss

Trading securities 28,681 28,681


Total assets 28,681 246,863 275,544

Liabilities

Financial liabilities valued at fair value through

profit or loss


Total liabilities 44,418 44,418

The fair value of financial instruments traded on active markets is based on quoted market

prices at the balance sheet date. A market is regarded as active if quoted prices are readily and

regularly available from an exchange, dealer, broker, industry group, pricing service, or

regulatory agency, and those prices represent actual and regularly occurring market transactions

on an arm's length basis. These instruments are included in Level 1. The instruments included in

Level 1 comprise, mainly, equity investments of Bank Deposit Certificates (CDBs) and

Repurchases (Repos) classified as trading securities.







120

The fair value of financial instruments that are not traded on an active market (for example,

over-the-counter derivatives) is determined by using valuation techniques. These valuation

techniques maximize the use of observable market data where it is available and rely as little as

possible on entity specific estimates. If all significant inputs required to fair value an instrument

are observable, the instrument is included in Level 2.

If one or more of the significant inputs is not based on observable market data, the instrument is

included in Level 3.

Specific valuation techniques used to value financial instruments include:

Quoted market prices of financial institutions or dealer quotes for similar instruments.

The fair value of interest rate swaps is calculated as the present value of the estimated

future cash flows based on observable yield curves.

Other techniques, such as discounted cash flow analysis, are used to determine fair

value for the remaining financial instruments.

The fair values of derivative financial instruments of the subsidiaries were determined based on

future cash flows (asset and liability position), taking into account the contracted conditions and

bringing those flows to present value by means of the discounted future interest rates disclosed

in the market. The fair values were estimated at a specific time, based on information available

and on the Company's own valuation methodologies.

Financial instruments by category

The Company's financial instruments by category can be summarized as follows:

Consolidated

Loans and

receivables

Assets valued at

fair value through

profit or loss Total

September 30, 2014

Assets, according to balance sheet

Derivative financial instruments 329,122 329,122

Trade accounts receivable and other accounts

receivable, excluding prepayments 3,461,709 3,461,709


loss 41,886 41,886

Cash and cash equivalents 5,427,870 5,427,870

8,889,579 371,008 9,260,587







121

Consolidated

Liabilities valued at

fair value through

profit or loss

Other financial

liabilities Total

September 30, 2014

Liabilities, according to balance sheet

Borrowings 6,385,038 6,385,038


Suppliers and other obligations, except legal

obligations 4,262,636 4,262,636

27,174 10,647,674 10,674,848

Consolidated

Loans and

Receivables

Assets valued at

fair value through

profit or loss Total

December 31, 2013

Assets, according to balance sheet


Trade accounts receivable and other accounts

receivable, excluding prepayments 3,548,988 3,548,988


loss 28,681 28,681

Cash and cash equivalents 5,287,642 5,287,642

8,836,630 275,544 9,112,174

Consolidated

Liabilities valued at

fair value through

profit or loss

Other financial

liabilities Total

December 31, 2013

Liabilities, according to balance sheet

Borrowings 4,746,656 4,746,656


Suppliers and other obligations, excluding legal

obligations 5,255,337 5,255,337

44,418 10,001,993 10,046,411







122

Capital management

The Company's objectives in managing its capital are to safeguard the Group's on-going ability

to provide returns to shareholders and benefits to other stakeholders, in addition to maintaining

the ideal capital structure for reducing this cost.

In order to maintain or adjust its capital, the Company may review its dividend payment policy,

return capital to the shareholders or, in addition, issue new shares or sell assets to reduce its

indebtedness, for example.

The Company's policy for protection against financial risks - Summary

The Company's policy stipulates the adoption of swap mechanisms against financial risks

involved in financing taken in foreign currency, in order to control the exposure to risks related

to exchange variation.

The contracting of derivative financial instruments against exchange exposure should occur

simultaneously with the debt contract that originated the exposure. The level of risk coverage to

be contracted for these exchange exposures is 100% in terms of time and amount.

At September 30, 2014, no type of margin or guarantee applied to transactions with derivative

instruments was entered into by the Company and its subsidiaries.

The criteria for selection of financial institutions rely on parameters that take into account the

rating provided by renowned rating agencies, the shareholders' equity and the degree of

concentration of operations and funds.

The table below shows the derivative instruments transactions contracted by the subsidiaries and

effective at September 30, 2014 and December 31, 2013:

September 30, 2014

Counterparty Average swap rates

Currency

Type of

SWAP DEBT SWAP Total debt

Total Swap

(Active Leg

Accrual)

% cove-

rage Active Leg Passive Leg

USD

LIBOR X

DI BEI

Santander, CITI MS and BOFA

1,164,763 1,164,763 100%

LIBOR 6M +

0.77% p.a. 95.25% do CDI

USD

LIBOR X

DI BNP CITI, JP Morgan 206,882 206,882

100%

LIBOR 6M +

2.53% p.a. 95.01% do CDI

USD LIBOR X

DI RfW* JP Morgan 245,365 245,365 100% LIBOR 6M +

1.35% p.a. 102.50% do CDI

USD

LIBOR X

DI BOFA BOFA 293,777 293,777 100%

LIBOR 3M +

1.35% p.a. 102% do CDI

USD PRE X DI JP Morgan JP Morgan 122,597 122,597 100% 1.73% p.a. 101.5% do CDI

USD PRE X DI Cisco Santander 98,114 98,114 100% 1.80% p. a. 93.80% do CDI

(*) The forward swap entered into with JP Morgan on September 30, 2014 sought to hedge the loan from

KfW which is only to be disbursed on October 20, 2014. The amounts shown in the “Total Debt” and

“Total Swap (Active Leg)” columns are therefore merely benchmarks to show that the swap will protect

100% of the debt with KfW which begins on October 20, 2014.







123

December 31, 2013

Counterparty Average swap rates

Currency

Type of

SWAP

Debt

SWAP

Total

debt

Total

Swap

(Active leg

Accrual)

% cove-

rage

Asset side

Liability side

USD

LIBOR

X DI

BEI

Santander, CITI, MS

and BOFA

1,115,324

1,115,241

100%

LIBOR 6M +

0.77% p.a.

95.25% of CDI

USD

LIBOR

X DI

BNP

CITI + BES

224,395

224,395

100%

LIBOR 6M +

2.53% p.a.

95.01% of CDI

USD

LIBOR

X DI

BOFA

BOFA

280,822

280,822

100%

LIBOR 3M +

1.25% p.a

102% of CDI

USD

PRE X

DI

JP

Morgan

JP Morgan

117,704

117,704

100%

1.73% p.a.

101.50% of

CDI

USD PRE X

DI CISCO

Santander

117,768 117,768

100%

1.8% p.a.

93.80% of CDI

Sensitivity analysis table - Effects of the variation on fair value of the swaps

For identifying possible distortions on consolidated derivative instruments currently in force, a

sensitivity analysis was made considering three different scenarios (probable, possible and

remote) and the respective impact on the results attained, namely:

Description

09/2014

Probable

Scenario

Possible

Scenario

Remote

Scenario

USD-indexed debit (BNP Paribas, BEI,

BOFA and JP Morgan)

1,873,693

1,873,693

2,361,676

2,802,612

Fair value of swap receivable 1,873,693 1,873,693 2,361,676 2,802,612

Fair value of swap payable (1,569,137) (1,569,137) (1,676,965) (1,679,204)

Net swap exposure 304,556 304,556 684,711 1,123,408

Because the subsidiaries own financial derivative instruments intended only to safeguard their

financial debt, the changes in the scenarios are accompanied by the respective protected

instrument, thus showing that the exposure effects arising from swaps are reflected in the debt.

In connection with these transactions, the subsidiaries disclosed the fair value of debt and of the

financial derivative instrument on separate lines (see above), so as to provide information on

their net exposure in each of the three scenarios.

Note that all transactions with financial derivative instruments contracted by the subsidiaries are

solely intended as financial protection. Consequently, any increase or decrease in their

respective market values will correspond to an inversely proportional change in the

corresponding portion of the financial debt underlying the financial derivative instruments

contracted by the subsidiaries.

Our sensitivity analyses referring to the derivative instruments in effect at September 30, 2014

basically rely on assumptions relating to variations of the market interest rates and the variation

of the US Dollar underlying the swap contracts. These assumptions were chosen solely because

of the characteristics of our derivative instruments, which are exposed only to interest rate and

exchange rate variations.







124

Given the characteristics of the subsidiaries' financial derivative instruments, our assumptions

basically took into consideration the effect of i) the variation of CDI and ii) fluctuation of the

US Dollar used in swap transactions, with the following percentages and quotations as a result:

Risk

variable

Probable

Scenario

Possible

Scenario

Remote

Scenario

CDI 10.81% 13.51% 16.22%

USD 2.4510 3.0638 3.6765

Gains and losses with derivatives in the period

09/2014

USD exchange risk vs. CDI (4,101)

Net gains (4,101)

Leverage

The Group's objectives in managing capital are to guarantee the capacity to provide financial

returns to its shareholders and benefits to stakeholders, as well as maintain a capital structure to

reduce costs.

To maintain or adjust the Group's capital structure Management can review the dividend policy,

reimburse the capital to its shareholders, issue new shares or sell assets to reduce, for example,

the net debt level.

Aligned with other market participants, the Group monitors, among other indexes, the financial

leverage, measured based on the index Net Debt / EBITDA.

The financial leverage indexes as of September 30, 2014 and December 31, 2013 are the

following:

Consolidated

09/2014 12/2013

Total borrowings and financing (Note 21 and 41) 6,083,090 4,544,210

Leasing - Liabilities (Note 19) 329,532 322,670

Leasing – Assets (Note 19) (193,850) -

Less: cash and cash equivalents (Notes 6 and 7) (5,427,870) (5,287,642)

Net Cash 790,902 (420,762)

EBITDA (last 12 months) (*) 5,478,860 5,206,743

Financial leverage index 0.14 (0.08)







125

(*) Reconciliation of Net Income for the year:

Net income for the year 1,585,050 1,505,614

Depreciation and amortization 2,973,075 2,767,870

Net Financial Income 283,395 302,720

Income tax and social contribution 637,340 630,539

EBITDA 5,478,860 5,206,743

42 Defined benefit pension plans and other post-employment benefits

Consolidated

09/2014 12/2013

PAMEC/active participants' policy and Health Plan 1,084 1,084

The Company and its subsidiaries have defined benefit pension plans and other post-

employment benefits particularly as a result of the period of privatization of the Telebrás

System. The number of current and former employees that are still entitled to these benefits is

extremely low and the amounts involved, whose calculations are based on the criteria set forth

in CPC 33 (R1), are irrelevant in the context of the quarterly information.

43 Management Fees

Key Management includes statutory officers and the Board of Directors. The remuneration to

key Management personnel for their services is presented below:

09/2014 09/2013

Salaries and other short-term benefits 8,896 8,111

Stock options payments 2,479 1,653

11,375 9,764

44 Insurance

The Company and its subsidiaries maintain a policy for monitoring the risks inherent to their

operations. Thus, at September 30, 2014, the Company and its subsidiaries had insurance

coverage against operating risks, third party liability, and health, among others. The

Management of the Company and its subsidiaries consider the insurance coverage sufficient to

cover eventual losses. The table below shows the main assets, liabilities or interests insured and

their respective amounts:







126

Types Amounts insured

Operating risks R$36,836,032

General Third Party Liability - RCG R$63,000

Vehicles (Executive and Operational Fleets)

100% of Fipe Table. R$1,000 for Civil Liability

Optional (Property Damages and Personal Injury)

and R$100 for Pain and Suffering.

45 Commitments

Rentals

The equipment and property rental agreements signed by the Company and its subsidiaries have

different maturity dates. Below is a list of minimum rental payments to be made under such

agreements:

2015 588,283

2016 618,286

2017 646,109

2018 675,184

2019 705,567

3,233,429

46 Expenses by type

09/2014 09/2013

Expenses by type

Cost of services provided and goods sold (7,382,397) (8,085,473)

Selling expenses (3,820,340) (3,692,940)

General and administrative expenses (825,608) (759,909)

Other revenue (expenses), net (571,303) (536,532)

(12,599,648) (13,074,854)

Classified as:

Personnel (706,778) (613,188)

Advertising and publicity (494,422) (450,325)

Third party services (2,388,523) (2,322,961)

Interconnection and connection means (2,602,094) (3,434,692)

Cost of goods sold (2,327,709) (2,474,736)

Depreciation and amortization (2,250,014) (2,044,810)


Taxes, fees and contributions (925,175) (911,921)


Provision for administrative and legal proceedings (189,299) (206,318)

Training (7,724) (10,644)

Others (68,405) (32,933)

(12,599,648) (13,074,854)







127

47 Supplementary disclosure about consolidated cash flow

09/2014 09/2013

Interest paid 260,046 176,676

Income tax and social contribution paid 161,376 283,067



128

Report on Review of Quarterly Information To the Board of Directors and Shareholders TIM Participações S.A. Introduction

We have reviewed the accompanying parent company and consolidated interim accounting information of TIM Participações S.A., included in the Quarterly Information Form (ITR) for the quarter ended September 30, 2014, comprising the balance sheet as at that date and the statements of income for the quarter and nine-month periods then ended, and the statements of changes in equity and cash flows for the nine-month period then ended, and a summary of significant accounting policies and other explanatory information.

Management is responsible for the preparation of the parent company interim accounting information in accordance with the accounting standard CPC 21, Interim Financial Reporting, of the Brazilian Accounting Pronouncements Committee (CPC), and of the consolidated interim accounting information in accordance with CPC 21 and International Accounting Standard (IAS) 34 - Interim Financial Reporting issued by the International Accounting Standards Board (IASB), as well as the presentation of this information in accordance with the standards issued by the Brazilian Securities Commission (CVM), applicable to the preparation of the Quarterly Information (ITR). Our responsibility is to express a conclusion on this interim accounting information based on our review. Scope of review We conducted our review in accordance with Brazilian and International Standards on Reviews of Interim Financial Information (NBC TR 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity and ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Brazilian and International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion on the parent company interim information

Based on our review, nothing has come to our attention that causes us to believe that the accompanying parent company interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by the CVM.

Conclusion on the consolidated interim information Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated interim accounting information included in the quarterly information referred to above has not been prepared, in all material respects, in accordance with CPC 21 and IAS 34 applicable to the preparation of the Quarterly Information, and presented in accordance with the standards issued by the CVM. Other matters Statements of value added



129

We have also reviewed the parent company and consolidated statements of value added for the nine-month period ended September 30, 2014. These statements are the responsibility of the Company’s management, and are required to be presented in accordance with standards issued by the CVM applicable to the preparation of Quarterly Information (ITR) and are considered supplementary information under IFRS, which do not require the presentation of the statement of value added. These statements have been submitted to the same review procedures described above and, based on our review, nothing has come to our attention that causes us to believe that they have not been prepared, in all material respects, in a manner consistent with the parent company and consolidated interim accounting information taken as a whole. Rio de Janeiro, November 4, 2014 PricewaterhouseCoopers Auditores Independentes CRC 2SP000160/O-5 "F" RJ

Sérgio Eduardo Zamora Contador CRC 1SP168728/O-4 "S" RJ



130

OPINION OF THE FISCAL COUNCIL

MEETING HELD ON NOVEMBER, 03rd

, 2014

The Members of the Fiscal Council of TIM Participações S.A. ("Company"), in the

exercise of its attributions and legal duties, as provided in Article 163 of the Brazilian

Corporate Law, conducted a review and analysis of quarterly financial statements, along

with the limited review report of PwC Independent Auditors, for the period that ended

on September 30th

, 2014 and considering the information provided by the company's

management and the Independent Auditors, consider the information appropriate for

submission to the Board of Directors of the Company, in accordance to the Brazilian

Corporate Law.

Rio de Janeiro (RJ), November 03rd

, 2014.

OSWALDO ORSOLIN

Chairman of the Fiscal Council

JOSINO DE ALMEIDA FONSECA

Member of the Fiscal Council

MAURÍCIO MARCELLINI PEREIRA

Member of the Fiscal Council



131

Opinions and Statements / Directors’ Statement on the Financial Statements

DIRECTORS’ STATEMENT

Rodrigo Modesto de Abreu (Chief Executive Officer), Claudio Zezza (Chief Financial

Officer), Lorenzo Federico Zanotti Lindner (Chief Operations Officer), Daniel Junqueira

Pinto Hermeto (Purchasing & Supply Chain Officer), Mario Girasole (Regulatory and

Institutional Affairs Officer), Roger Sole Rafols (Chief Marketing Officer), Rogério Tostes

Lima (Investor Relations Officer) e Jaques Horn (Legal Officer), as statutory directors of

TIM Participações S.A., declares, in accordance with article 25, paragraph 1, item VI of CVM

Instruction 480 of December 7, 2009, that: reviewed, discussed and agreed with the Company’s

Financial Statement for the period ended September 30, 2014.

Rio de Janeiro, November 04, 2014.

RODRIGO MODESTO DE ABREU

Chief Executive Officer

CLAUDIO ZEZZA

Chief Financial Officer

MARIO GIRASOLE

Regulatory and Institutional Affairs Officer

LORENZO FEDERICO ZANOTTI

LINDNER

Chief Operations Officer

ROGER SOLE RAFOLS

Chief Marketing Officer

DANIEL JUNQUEIRA PINTO HERMETO

Purchasing & Supply Chain Officer

ROGÉRIO TOSTES LIMA

Investor Relations Officer

JAQUES HORN

Legal Officer



132

Opinions and Statements / Directors’ Statement on the Auditor’s Report on

Special Review

DIRECTORS’ STATEMENT

Rodrigo Modesto de Abreu (Chief Executive Officer), Claudio Zezza (Chief Financial

Officer), Lorenzo Federico Zanotti Lindner (Chief Operations Officer), Daniel Junqueira

Pinto Hermeto (Purchasing & Supply Chain Officer), Mario Girasole (Regulatory and

Institutional Affairs Officer), Roger Sole Rafols (Chief Marketing Officer), Rogério Tostes

Lima (Investor Relations Officer) e Jaques Horn (Legal Officer), as statutory directors of

TIM Participações S.A., declares, in accordance with article 25, paragraph 1, item VI of CVM

Instruction 480 of December 7, 2009, that: reviewed, discussed and agreed with the views

expressed in the special review report of independent auditors from the Company for the period

ended September 30, 2014.

Rio de Janeiro, November 04, 2014.

RODRIGO MODESTO DE ABREU

Chief Executive Officer

CLAUDIO ZEZZA

Chief Financial Officer

MARIO GIRASOLE

Regulatory and Institutional Affairs Officer

LORENZO FEDERICO ZANOTTI

LINDNER

Chief Operations Officer

ROGER SOLE RAFOLS

Chief Marketing Officer

DANIEL JUNQUEIRA PINTO HERMETO

Purchasing & Supply Chain Officer

ROGÉRIO TOSTES LIMA

Investor Relations Officer

JAQUES HORN

Legal Officer

TIM PARTICIPAÇÕES S - Mziq

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